What changed in this filing

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Item 1. Financial Statements

2023-10-25 compared with 2023-07-26 · 143 added, 128 removed, 532 unchanged (34% of the section changed)

3 unchanged sentences

For the Three Months

For the Six Months

Ended June 30,

For the Nine Months

Ended September 30,

(in thousands, except per share data)

10 unchanged sentences

Total expenses

Equity in earnings of unconsolidated investees

Earnings (loss) before income taxes

Income tax expense (benefit)

Net earnings (loss)

Equity in earnings (loss) of unconsolidated investees

Earnings before income taxes

Income tax expense

Other comprehensive earnings (loss), net of tax

Comprehensive earnings (loss)

Basic net earnings (loss) per share

Diluted net earnings (loss) per share

Basic net earnings per share

Diluted net earnings per share

Weighted average number of common shares outstanding:

2 unchanged sentences

Condensed Consolidated Balance Sheets

September 30,

(in thousands, except share and per share data)

22 unchanged sentences

Income taxes-current

Current portion of long-term debt

Accrued expenses

20 unchanged sentences

Balance, January 1, 2022

Net earnings (loss)

Other comprehensive earnings (loss), net of tax

3 unchanged sentences

Balance, March 31, 2022

Net earnings (loss)

Other comprehensive earnings (loss), net of tax

3 unchanged sentences

Balance, June 30, 2022

Other comprehensive earnings (loss), net of tax

Deferred compensation

Share-based compensation

Dividends and dividend equivalents ($ 0.26 per share)

Balance, September 30, 2022

Comprehensive

3 unchanged sentences

Cumulative-effect adjustment from ASU 2023-02

Net earnings (loss)

Other comprehensive earnings (loss), net of tax

3 unchanged sentences

Balance, March 31, 2023

Net earnings (loss)

Other comprehensive earnings (loss), net of tax

3 unchanged sentences

Balance, June 30, 2023

Other comprehensive earnings (loss), net of tax

Deferred compensation

Share-based compensation

Dividends and dividend equivalents ($ 0.27 per share)

Balance, September 30, 2023

See accompanying notes to the unaudited condensed consolidated interim financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

For the Six Months

Ended June 30,

For the Nine Months

Ended September 30,

(in thousands)

11 unchanged sentences

Net proceeds from sale (purchase) of short-term investments

Net cash used in investing activities

Net cash provided by (used in) investing activities

Cash Flows from Financing Activities

Proceeds from issuance of debt

Payment of debt

Cash dividends paid

1 unchanged sentence

Net cash used in financing activities

Net increase in cash

Net increase (decrease) in cash

Cash at the beginning of the period

Cash at June 30,

Cash at September 30,

See accompanying notes to the unaudited condensed consolidated interim financial statements.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

2 unchanged sentences

As such, these unaudited condensed consolidated interim financial statements should be read in conjunction with our 2022 Annual Report on Form 10-K.

Management believes that the disclosures are adequate to make the information presented not misleading, and all normal and recurring adjustments necessary to present fairly the financial position at June 30, 2023 and the results of operations of RLI Corp.

Management believes that the disclosures are adequate to make the information presented not misleading, and all normal and recurring adjustments necessary to present fairly the financial position at September 30, 2023 and the results of operations of RLI Corp.

(the Company) and subsidiaries for all periods presented have been made.

16 unchanged sentences

PROSPECTIVE ACCOUNTING STANDARDS

There are no prospective accounting standards which would have a material impact on our financial statements as of June 30, 2023.

There are no prospective accounting standards which would have a material impact on our financial statements as of September 30, 2023.

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.

12 unchanged sentences

We then re-evaluate the overall allowance and determine whether the balance is sufficient and, if needed, an additional allowance is recognized.

The allowances for uncollectible amounts on paid and unpaid reinsurance recoverables were $ 16.2 million and $ 10.3 million, respectively, at June 30, 2023.

The allowances for uncollectible amounts on paid and unpaid reinsurance recoverables were $ 19 million and $ 11 million, respectively, at September 30, 2023.

At December 31, 2022, the amounts were $ 16 million and $ 11 million, respectively.

Changes in the allowances 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 or recoveries were applied to the allowances in the first six months of 2023.

No write-offs or recoveries were applied to the allowances in the first nine months of 2023.

We have no receivables with a due date that extends beyond one year that are not included in our allowance for uncollectible amounts.

INTANGIBLE ASSETS

The composition of goodwill and intangible assets at June 30, 2023 and December 31, 2022 is detailed in the following table:

The composition of goodwill and intangible assets at September 30, 2023 and December 31, 2022 is detailed in the following table:

September 30,

(in thousands)

4 unchanged sentences

Based upon these reviews, none of the assets were impaired.

In addition, there were no triggering events as of June 30, 2023 that would suggest an updated impairment test would be needed for our goodwill and intangible assets.

In addition, there were no triggering events as of September 30, 2023 that would suggest an updated impairment test would be needed for our goodwill and intangible assets.

EARNINGS PER SHARE

6 unchanged sentences

For the Three Months

Ended June 30, 2023

Ended June 30, 2022

Ended September 30, 2023

Ended September 30, 2022

(in thousands, except per share data)

6 unchanged sentences

Anti-dilutive securities excluded from diluted EPS

For the Six Months

Ended June 30, 2023

Ended June 30, 2022

For the Nine Months

Ended September 30, 2023

Ended September 30, 2022

(in thousands, except per share data)

9 unchanged sentences

In reporting the components of comprehensive earnings, we used the federal statutory tax rate of 21 percent.

Other comprehensive earnings (loss), as shown in the consolidated statements of earnings and comprehensive earnings, is net of tax benefit of $ 5 million for the second quarter of 2023, compared to $ 26 million of tax benefit for the same period in 2022.

For the six-month period ended June 30, 2023, other comprehensive earnings (loss) is net of tax expense of $ 5 million, compared to $ 57 million of tax benefit for the same period in 2022.

Unrealized gains, net of tax, recognized in other comprehensive earnings (loss) were $ 18 million for the first six months of 2023, compared to $ 213 million of unrealized losses, net of tax, during the same period last year.

The unrealized gains in 2023 were attributable to a decline in interest rates, which increased the fair value of securities held in the fixed income portfolio, compared to rising interest rates during 2022, which decreased the fair value of fixed income securities.

Other comprehensive earnings (loss), as shown in the consolidated statements of earnings and comprehensive earnings, is net of tax benefit of $ 15 million for the third quarter of 2023, compared to $ 22 million for the same period in 2022.

For the nine-month period ended September 30, 2023, other comprehensive earnings (loss) is net of tax benefit of $ 10 million, compared to $ 78 million for the same period in 2022.

Unrealized losses, net of tax, recognized in other comprehensive earnings (loss) were $ 39 million for the first nine months of 2023, compared to $ 294 million during the same period last year.

The unrealized losses in each period were attributable to an increase in interest rates, which decreased the fair value of securities held in the fixed income portfolio.

The following table illustrates the changes in the balance of each component of accumulated other comprehensive earnings (loss) for each period presented in the unaudited condensed consolidated interim financial statements:

1 unchanged sentence

For the Three Months

For the Six Months

Ended June 30,

For the Nine Months

Ended September 30,

Unrealized Gains/Losses on Available-for-Sale Securities

11 unchanged sentences

For the Three Months

For the Six Months

For the Nine Months

Component of Accumulated

Ended June 30,

Ended September 30,

Affected line item in the

3 unchanged sentences

Net realized gains (losses)

Credit gains presented within net realized gains

Credit gains (losses) presented within net realized gains

Earnings (loss) before income taxes

44 unchanged sentences

Equity Securities:

As of June 30, 2023, nearly all of our equity holdings were traded on an exchange.

As of September 30, 2023, 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).

17 unchanged sentences

We carry our equity securities at fair value and categorize all of our debt securities as available-for-sale, which are carried at fair value.

Realized gains and losses on disposition of investments are based on specific identification of the investments sold on the settlement date.

The following is a summary of the disposition of fixed income and equity securities for the six-month periods ended June 30, 2023 and 2022:

Realized gains and losses on disposition of investments are based on the specific identification of the investments sold on the settlement date.

The following is a summary of the disposition of fixed income and equity securities for the nine-month periods ended September 30, 2023 and 2022:

Gross Realized

10 unchanged sentences

FAIR VALUE MEASUREMENTS

Assets measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022 are summarized below:

As of June 30, 2023

Assets measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022 are summarized below:

As of September 30, 2023

Quoted Prices in

27 unchanged sentences

Sales / Calls / Maturities

Balance as of June 30, 2023

Balance as of September 30, 2023

Change in unrealized gains (losses) during the period for Level 3 assets held at period-end - included in other comprehensive earnings (loss)

The amortized cost and fair value of available-for-sale fixed income securities by contractual maturity as of June 30, 2023 were as follows:

June 30, 2023

The amortized cost and fair value of available-for-sale fixed income securities by contractual maturity as of September 30, 2023 were as follows:

September 30, 2023

(in thousands)

7 unchanged sentences

Asset-backed, commercial mortgage-backed and mortgage-backed securities

The amortized cost and fair value of available-for-sale securities at June 30, 2023 and December 31, 2022 are presented in the tables below.

Amortized cost does not include the $ 22 million and $ 20 million of accrued interest receivable as of June 30, 2023 and December 31, 2022, respectively.

June 30, 2023

The amortized cost and fair value of available-for-sale securities at September 30, 2023 and December 31, 2022 are presented in the tables below.

Amortized cost does not include the $ 23 million and $ 20 million of accrued interest receivable as of September 30, 2023 and December 31, 2022, respectively.

September 30, 2023

(in thousands)

20 unchanged sentences

The allowance for any security is limited to the amount that the security’s fair value is below amortized cost.

As of June 30, 2023, the discounted cash flow analysis resulted in an allowance for credit losses on 18 securities.

As of September 30, 2023, the discounted cash flow analysis resulted in an allowance for credit losses on 19 securities.

The following table presents changes in the allowance for expected credit losses on available-for-sale securities:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

4 unchanged sentences

Net increase (decrease) from securities that had an allowance at the beginning of the period

Balance as of June 30,

During the first six months of 2023, net realized gains included $ 1.7 million of losses on fixed income securities for which the cost basis was written down to fair value due to a credit event and restructurings.

We recognized $ 0.1 million of losses on securities for which we no longer had the intent to hold until recovery during the first six months of 2022.

As of June 30, 2023, in addition to the securities included in the allowance for credit losses, the fixed income portfolio contained 1,474 securities with an unrealized loss position for which an allowance for credit losses had not been recorded.

Balance as of September 30,

During the first nine months of 2023, $ 2 million of realized losses were recognized on fixed income securities for which the cost basis was written down to fair value due to a credit event, restructurings and losses on securities for which we no longer had the intent to hold until recovery.

We recognized less than $ 1 million of losses on securities for which we no longer had the intent to hold until recovery during the first nine months of 2022.

As of September 30, 2023, in addition to the securities included in the allowance for credit losses, the fixed income portfolio contained 1,547 securities with an unrealized loss position for which an allowance for credit losses had not been recorded.

The $ 330 million in associated unrealized losses represents 11 percent of the fixed income portfolio’s cost basis and 10 percent of total invested assets.

Isolated to these securities, unrealized losses decreased through the first six months of 2023, as credit spreads have tightened modestly while interest rates stayed flat during the period.

Isolated to these securities, unrealized losses increased through the first nine months of 2023, as interest rates increased during the period.

Of the total 1,547 securities, 1,200 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 June 30, 2023 and December 31, 2022 after factoring in the allowance for credit losses.

The following table illustrates the total value of fixed income securities that were in an unrealized loss position as of September 30, 2023 and December 31, 2022 after factoring in the allowance for credit losses.

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.

June 30, 2023

September 30, 2023

December 31, 2022

19 unchanged sentences

Non-agency asset-backed, commercial mortgage-backed and mortgage-backed securities

The following table shows the composition of the fixed income securities in unrealized loss positions, after factoring in the allowance for credit losses, at June 30, 2023 by the National Association of Insurance Commissioners (NAIC) rating and the generally equivalent Standard & Poor’s (S&P) and Moody’s ratings.

The following table shows the composition of the fixed income securities in unrealized loss positions, after factoring in the allowance for credit losses, at September 30, 2023 by the National Association of Insurance Commissioners (NAIC) rating and the generally equivalent Standard & Poor’s (S&P) and Moody’s ratings.

The vast majority of the securities are rated by S&P and/or Moody’s.

1 unchanged sentence

Other Invested Assets

We had $ 61 million of other invested assets at June 30, 2023, compared to $ 48 million at December 31, 2022.

We had $ 60 million of other invested assets at September 30, 2023, compared to $ 48 million at December 31, 2022.

Other invested assets include investments in low income housing tax credit partnerships (LIHTC) and historic tax credit partnerships (HTC), membership in the Federal Home Loan Bank of Chicago (FHLBC), and investments in private funds.

Our LIHTC and

HTC investments are carried at amortized cost and our investment in FHLBC stock is carried at cost.

LIHTC and HTC investments are carried at amortized cost and our investment in FHLBC stock is carried at cost.

Due to the nature of the LIHTC, HTC 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.

Our LIHTC interests had a balance of $ 12 million at June 30, 2023, compared to $ 13 million on December 31, 2022.

Our LIHTC interests recognized amortization of $ 0.8 million as a component of income tax expense and a total tax benefit of $ 0.8 million during the second quarter of 2023, compared to $ 0.8 million of amortization and $ 0.9 million of tax benefit during the same period in 2022.

For the six-months ended June 30, 2023, our LIHTC interest recognized amortization of $ 1.6 million and a total benefit of $ 1.6 million, compared to $ 1.7 million of amortization and $ 1.7 million of tax benefit for the same period in 2022.

Our unfunded commitment for our LIHTC investments totaled $ 1 million at June 30, 2023 and will be paid out in installments through 2035.

Our HTC investment had a balance of $ 15 million at June 30, 2023, compared to $ 11 million at December 31, 2022.

Our LIHTC interests had a balance of $ 11 million at September 30, 2023, compared to $ 13 million on December 31, 2022.

Our LIHTC interests recognized amortization of $ 0.8 million as a component of income tax expense and a total tax benefit of $ 0.8 million during the third quarter of 2023, compared to $ 0.8 million of amortization and $ 0.9 million of tax benefit during the same period in 2022.

For the nine-months ended September 30, 2023, our LIHTC interest recognized amortization of $ 2.3 million and a total benefit of $ 2.4 million, compared to $ 2.5 million of amortization and $ 2.6 million of tax benefit for the same period in 2022.

Our unfunded commitment for our LIHTC investments was less than $ 1 million at September 30, 2023 and will be paid out in installments through 2035.

Our HTC investment had a balance of $ 14 million at September 30, 2023, compared to $ 11 million at December 31, 2022.

Through 2022, the investment was accounted for as an investment in unconsolidated investee.

Due to the adoption of ASU 2023-02, Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method , the investment was reclassified as an other invested asset during 2023.

A total tax benefit of $ 1.5 million was recognized from our HTC investment during the second quarter of 2023, compared to $ 1.3 million in the second quarter of 2022.

For the six-months ended June 30, 2023, our HTC investment recognized a total benefit of $ 2.9 million, compared to $ 2.6 million for the same period in 2022.

Our HTC investment recognized $ 1.1 million of amortization as a component of income tax expense during the second quarter of 2023 and $ 2.3 million of amortization during the first six months of 2023.

Our unfunded commitment for our HTC investment totaled $ 4 million at June 30, 2023 and is expected be paid during 2023.

As of June 30, 2023, $ 56 million of investments were pledged as collateral with the FHLBC to ensure timely access to the secured lending facility that ownership of FHLBC stock provides.

As of June 30, 2023, $ 50 million of borrowings were outstanding with the FHLBC.

Our investments in private funds totaled $ 27 million as of June 30, 2023, down from $ 28 million as of December 31, 2022, and had $ 5 million of associated unfunded commitments at June 30, 2023.

A total tax benefit of $ 1.4 million was recognized from our HTC investment during the third quarter of 2023, compared to $ 1.3 million in the third quarter of 2022.

For the nine-months ended September 30, 2023, our HTC investment recognized a total benefit of $ 4.3 million, compared to $ 3.9 million for the same period in 2022.

Our HTC investment recognized $ 1.1 million of amortization as a component of income tax expense during the third quarter of 2023 and $ 3.4 million of amortization during the first nine months of 2023.

Our unfunded commitment for our HTC investment totaled $ 1 million at September 30, 2023 and is expected be paid during 2023.

As of September 30, 2023, $ 57 million of investments were pledged as collateral with the FHLBC to ensure timely access to the secured lending facility that ownership of FHLBC stock provides.

As of September 30, 2023, $ 50 million of borrowings were outstanding with the FHLBC.

Our investments in private funds totaled $ 27 million as of September 30, 2023, down from $ 28 million as of December 31, 2022, and had $ 5 million of associated unfunded commitments at September 30, 2023.

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.

Investments in Unconsolidated Investees

We had $ 55 million of investments in unconsolidated investees at June 30, 2023, compared to $ 58 million at December 31, 2022.

At June 30, 2023, our investment in Prime Holdings Insurance Services, Inc.

We had $ 56 million of investments in unconsolidated investees at September 30, 2023, compared to $ 58 million at December 31, 2022.

At September 30, 2023, our investment in Prime Holdings Insurance Services, Inc.

(Prime) was $ 56 million and other investments in unconsolidated investees totaled less than $ 1 million.

4 unchanged sentences

Short-term investments are carried at cost.

We had a cash and short-term investment balance of $ 17 million and $ 271 million, respectively, at June 30, 2023, compared to $ 23 million and $ 36 million, respectively, at December 31, 2022.

We had a cash and short-term investment balance of $ 18 million and $ 125 million, respectively, at September 30, 2023, compared to $ 23 million and $ 36 million, respectively, at December 31, 2022.

As of September 30, 2023, we had $ 100 million in debt outstanding.

On September 15, 2023, we retired $ 150 million in senior notes that were originally issued in 2013.

Additionally, on September 15, 2023, we accessed $ 50 million from our revolving line of credit with PNC Bank, N.A.

The borrowing may be repaid at any time and carries a floating interest rate of 7.07 percent which will reset during the first quarter of 2024.

The credit facility with PNC was entered into during the first quarter of 2023 and replaced the previous $ 60 million facility with Bank of Montreal, Chicago Branch, which expired on March 27, 2023 .

The line of credit permits us to borrow up to an aggregate principal amount of $ 100 million, but may be increased up to an aggregate principal amount of $ 130 million under certain conditions.

The facility has a three-year term that expires on May 29, 2026 .

Further, RLI Insurance Company borrowed $ 50 million from the Federal Home Loan Bank of Chicago (FHLBC) on November 10, 2021.

The borrowing matures on November 10, 2023 and has an option to be paid off prior to maturity.

Interest is paid monthly at an annualized rate of 0.84 percent.

HISTORICAL LOSS AND LAE DEVELOPMENT

The following table is a reconciliation of our unpaid losses and settlement expenses (LAE) for the first six months of 2023 and 2022:

For the Six Months

Ended June 30,

The following table is a reconciliation of our unpaid losses and settlement expenses (LAE) for the first nine months of 2023 and 2022:

For the Nine Months

Ended September 30,

(in thousands)

7 unchanged sentences

Prior accident years

Net unpaid losses and LAE at June 30,

Unpaid losses and LAE at June 30,

For the first six months of 2023, incurred losses and LAE included $ 72 million of favorable development on prior years’ loss reserves, largely from accident years 2018 through 2022.

Commercial excess, professional services, surety, general liability, personal umbrella, marine and commercial property were drivers of the favorable development.

Net unpaid losses and LAE at September 30,

Unpaid losses and LAE at September 30,

For the first nine months of 2023, incurred losses and LAE included $ 94 million of favorable development on prior years’ loss reserves, largely from accident years 2016 through 2018 and 2020 through 2022.

Commercial excess, executive products, general liability, professional services, personal umbrella, surety and commercial property were drivers of the favorable development.

No products experienced significant adverse development.

For the first six months of 2022, incurred losses and LAE included $ 70 million of favorable development on prior years’ loss reserves, largely from accident years 2018 through 2021.

General liability, professional services, transportation, marine and surety were drivers of the favorable development.

For the first nine months of 2022, incurred losses and LAE included $ 103 million of favorable development on prior years’ loss reserves, largely from accident years 2018 through 2021.

General liability, professional services, transportation, executive products, commercial excess, marine and surety were drivers of the favorable development.

No products experienced significant adverse development.

Our effective tax rate for the three and six months ended June 30, 2023 was 19.1 percent and 19.4 percent, respectively, compared to 65.8 percent and 12.1 percent, respectively, for the same period in 2022.

Our effective tax rate for the three and nine months ended September 30, 2023 was 9.9 percent and 18.7 percent, respectively, compared to 20.7 percent and 20.0 percent, respectively, for the same period in 2022.

Effective rates are dependent upon components of pretax earnings and the related tax effects.

Tax-favored adjustments acting on pretax earnings resulted in a lower effective tax rate for the second quarter of 2023.

The effective tax rate was higher for the six-month period in 2023, as higher pretax income decreased the percentage impact of tax-favored adjustments.

Income tax expense attributable to income from operations for the three and six-month period ended June 30, 2023 and 2022 differed from the amounts computed by applying the U.S.

The effective tax rate was lower for the three and nine-month periods in 2023, as lower pretax income increased the percentage impact of tax-favored adjustments.

Income tax expense attributable to income from operations for the three and nine-month period ended September 30, 2023 and 2022 differed from the amounts computed by applying the U.S.

federal tax rate of 21 percent to pretax income by the items detailed in the below table.

In interim periods, income taxes are adjusted to reflect the effective tax rate we anticipate for the year, with adjustments flowing through the other items, net line.

For the Three Months Ended June 30, 2023

For the Six Months Ended June 30, 2023

For the Three Months Ended September 30, 2023

For the Nine Months Ended September 30, 2023

(in thousands)

25 unchanged sentences

Compensation expense is based on the probable number of awards expected to vest.

The total compensation expense related to equity awards was $ 2.2 million and $ 4.7 million in the three and six-month periods ended June 30, 2023, respectively, compared to $ 2.3 million and $ 3.7 million, respectively, for the same period in 2022.

The total income tax benefit was $ 0.3 million and $ 0.8 million for the three and six-month periods ended June 30, 2023, compared to $ 0.4 million and $ 0.6 million, respectively, for the same periods in 2022.

The total compensation expense related to equity awards was $ 2.0 million and $ 6.6 million in the three and nine-month periods ended September 30, 2023, respectively, compared to $ 2.4 million and $ 6.2 million, respectively, for the same period in 2022.

The total income tax benefit was $ 0.3 million and $ 1.1 million for the three and nine-month periods ended September 30, 2023, compared to $ 0.4 million and $ 1.0 million, respectively, for the same periods in 2022.

Total unrecognized compensation expense relating to outstanding and unvested awards was $ 7 million, which will be recognized over the weighted average vesting period of 2.97 years.

6 unchanged sentences

Shares issued upon option exercise are newly issued shares.

The following tables summarize option activity for the six-month period ended June 30, 2023:

The following tables summarize option activity for the nine-month period ended September 30, 2023:

Exercise Price

4 unchanged sentences

Options canceled/forfeited

Outstanding options at June 30, 2023

Exercisable options at June 30, 2023

The intrinsic value, which is the difference between the fair value and the exercise price, of options exercised was $ 16 million and $ 5 million during the first six months of 2023 and 2022, respectively.

The fair value of options was estimated using a Black-Scholes based option pricing model with the following weighted average grant-date assumptions and weighted average fair values as of June 30:

Outstanding options at September 30, 2023

Exercisable options at September 30, 2023

The intrinsic value, which is the difference between the fair value and the exercise price, of options exercised was $ 17 million and $ 6 million during the first nine months of 2023 and 2022, respectively.

The fair value of options was estimated using a Black-Scholes based option pricing model with the following weighted average grant-date assumptions and weighted average fair values as of September 30:

Weighted-average fair value of grants

4 unchanged sentences

The risk-free rate was determined based on U.S.

treasury yields that most closely approximated the option’s expected life.

treasury yields that most closely approximated the options’ 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.

6 unchanged sentences

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 $ 1 million and $ 2 million during the first six months of 2023 and 2022, respectively.

The total fair value of restricted stock units that vested was $ 3 million and $ 2 million during the first nine months of 2023 and 2022, respectively.

Nonvested at January 1, 2023

Nonvested at June 30, 2023

Nonvested at September 30, 2023

OPERATING SEGMENT INFORMATION

2 unchanged sentences

For the Three Months

For the Six Months

Ended June 30,

For the Nine Months

Ended September 30,

(in thousands)

5 unchanged sentences

(in thousands)

Net underwriting income

Net underwriting income (loss)

Net investment income

2 unchanged sentences

General corporate expense and interest on debt

Equity in earnings of unconsolidated investees

Earnings (loss) before income taxes

Income tax expense (benefit)

Net earnings (loss)

Equity in earnings (loss) of unconsolidated investees

Earnings before income taxes

Income tax expense

The following table further summarizes revenues by major product type within each operating segment:

For the Three Months

For the Six Months

For the Nine Months

Net Premiums Earned

Ended June 30,

Ended September 30,

(in thousands)

15 unchanged sentences

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.

Operating lease costs for future minimum lease payments are recognized on a straight-line basis over the lease terms.

Variable lease costs are expensed in the period in which the obligations are incurred.

Sublease income is recognized on a straight-line basis over the sublease term.

The Company’s operating lease obligations are for branch office facilities.

The components of lease expense and other lease information as of and during the three and six-month periods ended June 30, 2023 and 2022 were as follows:

The components of lease expense and other lease information as of and during the three and nine-month periods ended September 30, 2023 and 2022 were as follows:

For the Three Months

For the Six Months

Ended June 30,

For the Nine Months

Ended September 30,

(in thousands)

9 unchanged sentences

(in thousands)

June 30, 2023

September 30, 2023

December 31, 2022

3 unchanged sentences

Weighted-average discount rate - operating leases

Future minimum lease payments under non-cancellable leases as of June 30, 2023 were as follows:

Future minimum lease payments under non-cancellable leases as of September 30, 2023 were as follows:

(in thousands)

June 30, 2023

September 30, 2023

Total future minimum lease payments

9 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements