Rli Corp Q2 FY2022 Earnings Call

Good morning and welcome to the RLI Corp. Second Quarter Earnings Teleconference. After management’s prepared remarks, we will open the conference up for question and answers. Before we get started, let me remind everyone that through the course of the teleconference, RLI management may make comments that reflect their intentions, beliefs, and expectations for the future. As always, these forward-looking statements are subject to certain factors and uncertainties, which could cause actual results to differ materially. Please refer to the risk factors described in the company's various SEC filings, including in the Annual Report on Form 10-K as supplemented in Forms 10-Q, all of which should be reviewed carefully. The company has filed a Form 8-K with the Securities and Exchange Commission that contains the press release announcing second quarter results. During the call, RLI management may refer to operating earnings and earnings per share from operations, which are non-GAAP measures of financial results. RLI's operating earnings and earnings per share from operations consist of net earnings after the elimination of after-tax realized gains or losses and after-tax unrealized gains or losses on equity securities. RLI's management believes these measures are useful in gauging core operating performance across reporting periods, but may not be comparable to other companies' definitions of operating earnings. The Form 8-K contains a reconciliation between operating earnings and net earnings. The Form 8-K and press release are available on the company's website at www.rlicorp.com. I will now turn the conference over to RLI's Chief Investment Officer and Treasurer, Mr. Aaron Diefenthaler. Please, go ahead.

Thank you and good morning. Welcome to RLI's second quarter earnings call for 2022. Joining us today are Craig Kliethermes, President and CEO; Jen Klobnak, Chief Operating Officer; Todd Bryant, Chief Financial Officer; and Jon Michael, Chairman. Today's agenda should be familiar, as Todd will start off with financial results for the quarter ended June 30th. Craig and Jen will follow offering high-level comments on the current market environment and details on our product segments. We will then take your questions, and Craig will close with some final thoughts. Todd?

Thanks, Aaron. Good morning, everyone. Yesterday, we reported second quarter operating earnings of $1.49 per share, as strong underwriting results and growth in investment income led the way. Underwriting income benefited from limited spring storm activity and generally lower property losses, an improved underlying loss ratio in our Casualty segment, continued favorable development on prior year's loss reserves in all three segments, and a lower expense ratio. All in, we posted a combined ratio of 80.2% for the quarter and experienced continued growth in top line, which was up 17%. Investment income advanced 11%, as reinvestment rates continued to move higher, and operating cash flow remained strong and supportive of additional investments in the portfolio. Realized gains were $13 million in the quarter, while unrealized losses on equity securities were $101 million. As mentioned on prior calls, large movements in equity prices between periods can have a significant impact on net earnings, which you can see in the comparative quarterly results. Craig and Jen will talk more about premium in a minute, but at a high level, all three segments experienced growth, as we continue to benefit from favorable market conditions in most areas of our business. From an underwriting income perspective, the quarterly combined ratio of 80.2% compared to 84.8% a year ago. Our loss ratio declined 2.7 points, largely due to low property losses during the quarter. Spring storm losses were $3 million in the quarter, with $2.5 million impacting properties and $0.5 million in Casualty. This compares to $8 million for the same period last year, with $7 million in property and $1 million in Casualty. From a prior year's reserves perspective, all three segments experienced favorable emergence during the quarter. Casualty experienced $17 million of favorable development, with notable contributions from general liability, design and miscellaneous professional liability, and transportation. Property posted $4 million in favorable emergence, with the largest benefit from our Marine business. In surety, contract, and commercial were responsible for the bulk of that segment's $3 million in positive development during the quarter. On a comparative basis, you may recall that surety was adverse $3 million during the same period last year, as we strengthened reserves on the energy portion of our commercial business. Moving to expenses. Compared to last year, our quarterly expense ratio decreased by 1.9 points to 38.5%. This result is on par with the first quarter and continues to reflect improved leverage on our expense base, as net premiums earned continue to grow. Certain incentive-related amounts that are influenced by growth in book value were also down. On the asset side of the balance sheet, it has been a difficult six-month period for investments, as stocks and bonds were correlated to the downside through the second quarter. Total return performance came in at minus 6.1% during the quarter and minus 10% on a year-to-date basis. The vast majority of this decline is in unrealized gains and losses, and we have historically utilized a low turnover approach on the fixed income and held many securities to maturity. Purchase activity remains focused on high-quality, investment-grade bonds, with new money yields in the mid to high 3% range. As we have discussed in the past, price changes in the fixed income portfolio are included in comprehensive earnings, which turned in a quarterly loss of $99.8 million, or $2.20 per share. This resulted in a decline in book value per share of 8% during the quarter, adjusted for dividends. Book value ended the quarter at $23.02 per share, down 13% from year-end again adjusted for dividends. For our unconsolidated investees, total earnings decreased $2.3 million compared to last year, with Maui Jim contributing $8.5 million and Prime offering $3.6 million. As a reminder, in the first quarter, we discussed an agreement to sell our minority stake in Maui Jim, outlining anticipated after-tax proceeds of approximately $500 million. Final proceeds will be subject to certain adjustments at closing, which we expect to occur in the second half of the year. All in all, an excellent operating quarter and a strong first half of the year. And with that, I'll turn the call over to Craig.

Thank you, Aaron and Todd, and good morning, everyone. As Todd mentioned, we're off to a very good first half of the year. We're very pleased with the growth coming from a mix of rate exposure-based increases and new business. We finished the quarter with top line growth of 17% on an 80 combined ratio. The midyear report card looks pretty good, with growth up 19% and a combined ratio that starts with a seven, but we know that the hard work is never done. We have realized growth in underwriting profitability across all major product groups in our portfolio. Our narrow and deep underwriting teams are still uncovering opportunities in the markets where we compete. We have observed some market disruption in several of our niches. At the same time, the markets we serve continue to see new entrants who are confident in their underwriting prowess. Our diversified portfolio of specialty products and conservative approach to underwriting and risk management provides us some protection but not immunity against market inflation and recessionary pressures. We have navigated market uncertainty before and have confidence that our talented associates can adapt and thrive in all environments we may face. Our underwriting teams will remain focused on providing consistent and disciplined risk management solutions for our policyholders, while capitalizing on opportunities to serve new customers. With that, I'll turn it over to Jen to offer up some more color by segment.

Thank you, Craig. The Property segment produced a 65 combined ratio, with 48% premium growth. Attractive market conditions drove an 8% positive rate change for the quarter. First, the segment contributed to the profit and growth we experienced. The headline continues to be the hard market conditions within the Southeast property market. Admitted markets are absent, and the E&S competitors who remain continue to offer lower limits than historical levels. Several markets announced a renewed focus in this area, but we have not encountered any activity to date. We achieved a 24% rate increase on hurricane exposure this quarter, while continuing to tighten our terms and conditions and risk selection criteria. With the growth in exposure this year, we purchased $150 million of additional all-peril catastrophe reinsurance limit effective May 1st. This brings our total tower for hurricane risk to $625 million excess of $25 million in coverage. Additional reinsurance ensures our exposure aligns with our net risk talent. With our underwriting changes in certain geographies and classes, the growth in our exposures slowed toward the end of the quarter, as we work to optimize the use of our new capacity. We have been hiring to support the growth in all property product groups, including E&S property, Marine, and Hawaii Homeowners. Our new team members have found additional growth opportunities, which has made a positive impact on our expense ratio. In all areas, we are mindful of increased valuations to ensure we are collecting adequate premium for the exposure. Our terms and conditions are customized to incentivize the insurer to disclose appropriate valuations. From a catastrophe perspective, it has been a quiet first half relative to last year. We are entering the second half of the year in a position of strength, and expect to meet any new challenges with the same hallmark discipline we have maintained through previous market cycles. Surety produced a 73 combined ratio with 13% top line growth. The growth was driven by our commercial surety group, where we have expanded staff and are attracting new business and relationships. In contract surety, we continue to see construction projects cost more because of labor and materials. The project pipeline for our contractors is still healthy, as it is a backlog of public works projects. There has been turmoil in both commercial and contract surety in the industry with several competitors experiencing increased loss activity and underwriter turnover by closely monitoring the financial health of our principles, as we navigate the changing economic conditions. Casualty produced an 88 combined ratio with 5% growth in premium. Rate change was positive 5% for this segment. The slowdown in growth in rate was driven by our Executive Products Group. Recall that last year we began exiting cyber and reps and warranties insurance lines. In addition, we are seeing a starkly different competitive environment for this product group. After several years of significant rate increases, brokers are pushing for rate decreases and expanded limits as well as terms and conditions primarily on public company directors and officers coverage. We have also lost several larger premium accounts that we participated on opportunistically during the hard market. The change in production for this line demonstrates our disciplined approach to underwriting. Most of the remaining products in the Casualty segment demonstrated growth. Transportation premium increased 13%. Much of this is due to a 9% rate change and the rebounding exposures in our public auto book. As I've mentioned in previous quarters, competition in this market has heightened, especially in the truck and public products. Public accounts in particular are not being marketed as much. The new business is hard to come by. Competitors in the transportation space seem to have a very short memory regarding lost potential in wheels-based business. Our E&S excess liability product also grew 7%, including a 9% rate change, which we believe continues to outpace loss trends. Personal umbrella is also worth noting, the 21% growth in premium, as we continue to invest in product updates designed to enhance the customers' experience. Overall, the Casualty segment is in good shape, and we continue to see opportunities for profitable growth. I'll turn the call back over to Craig for final comments.

Thanks, Jen. A very good quarter and great first half of the year. We will remain vigilant and highly adaptive to the market and economic pressures ahead. Disruption and uncertainty create opportunities for those who do not waver from their proven discerning approach. RLI is powered by employee owners, who are knowledgeable, disciplined, and empowered to solve the challenges they face. We are a great home for folks who are customer-focused and flourish in a strong ownership culture that aligns shareholders' interests with shared financial rewards. I want to thank all of our associate owners for their good care of our customers and for delivering differentiating underwriting results to our shareholders. Being different has delivered again. With that, I will turn it back to the operator.

Thank you. The question-and-answer session will now begin. Our first question today comes from Greg Peters with Raymond James. Greg, your line is open.

Hi. Good morning everyone. I guess, the first question I’ll focus on is the growth particularly in the Property account. It's quite strong. It brings to mind the potential for a changing sort of profile as it relates to CAT-exposure and quarterly retentions. And I just thought maybe you could review your expectations. I think you said on hurricanes, you're now at a $25 million retention. If you could just sort of review your perspectives on retentions and CAT events, that would be helpful.

Sure. Thanks, Greg. So we've had the $25 million retention since after KRW. So that's a consistent net appetite for us over all those years, 15 or more years now. As we think about our catastrophe exposure, we're looking at a marketplace where this is as good as it gets. And for RLI, when there is a market where you can do what you need to cover the exposure and support your brokers and your insurers, this is the time to write the business. A lot of our competitors have pulled back or have gotten out and are missing out on the opportunity. So we're there. Now there's more business than we can handle. Our brokers have a lot of business coming in, and we try to get to as much as we can. So there is a need for more capacity in this space. We obviously pay attention to how much surplus we have, how much reinsurance we buy, and what we're comfortable with from an earnings standpoint as well. And that's why we decided to buy the additional reinsurance limit. So from a net perspective, we're maintaining about the same exposure that we have in the past. We're just taking advantage of the market, bringing in more premium, actually getting a higher return on the exposure, but ending up with a similar net risk profile.

Got it. That makes sense. Can you provide an update on the reserve development that has been a significant contributor to your results? Specifically, which accident years are impacting Casualty, and what is your perspective on those results?

Greg, it's Todd. It crosses several accident years, I would say 16 to 20, so the multiple accident years. I think as we go through it, as our actuaries go through it, their approach remains the same. So nothing has changed there. It is down a little bit from what it was last quarter or the few quarters before that. But I don't think there's anything there to really note. We certainly haven't seen inflation yet in our data from a reserving perspective. We're conscious of that. That certainly probably influences our approach to things just given our generally conservative nature, but nothing really of note outside of that.

As a follow-up to that point, when considering inflation and its impact on reserve development, which areas do you believe are most vulnerable to the effects of the current inflation environment on reserve assumptions?

I think it can affect all three segments to some degree. But Casualty probably again the longer-term nature there. We certainly think about that. We've typically taken a longer-term view of watching the current term, right, the near term but taking a longer-term loss cost trend approach. And then I think to the extent that results come in better than that, that's where you're going to see some of the favorable development over time.

Got it. Thank you for the answers.

You bet.

Thank you, Greg.

Our next question comes from Meyer Shields with KBW. Please go ahead.

Thanks. I was hoping if you could give us a little bit more color on your comments about the marketplace for surety?

Sure. So the surety marketplace, I would say, is mixed. There are some competitors in the industry that have dealt with some larger losses in the last couple of years, and so they have changed their appetite. That's also caused some turnover in those shops. And so that also causes a change in appetite at times. From our perspective, we watch what the economic conditions are today. I mean, the key to surety is to underwrite the financial viability of your principles. And so really looking at economic trends and how people are navigating the economic conditions, contractors or for commercial surety, other types of entities. Do they have a strong balance sheet? And then in the contractor space, it's really about understanding how they're approaching jobs. So in this environment, where materials are difficult to come by, labor is an issue, we ask a lot more questions. Though I think the industry has come around to asking more questions, which is helpful to understand for a given project. What is the planning that's going into place to make sure this project gets done on time? And how much is it really going to cost? And what’s Plan B if things happen? So I think the competitive environment has allowed us to continue asking more questions just like we always have, but I think it's more tolerable now by our agents. The construction market is fairly healthy still, which means there's plenty of jobs to look at and to bid on. So we have plenty of flow coming in. We are seeing some new business just because we have some new hires. And any time you have someone new in an area, that tends to provide a little energy, so we're excited about that. But it remains a very competitive environment. And I think with the uncertainty of the economy going forward, it's an area to be careful. And so we're already contemplating that in our underwriting where are things going making sure that we're being diligent. Hopefully, our competitors are as well but that's to be determined.

Is it fair to say that the construction business that you have in surety and elsewhere is the most technologically sensitive? Is that the right way to think about your book?

Would you say it's the most economically sensitive?

Yeah. That’s the question.

In terms of the economy, the construction industry is important for us to monitor since about a third of our business is connected to it. We consider its trends to be indicators of broader market conditions. Our transportation business also provides good insight into future developments. The main challenge we face right now is the shortage of qualified drivers, which is a problem even though there are many goods to transport and jobs available. From an economic standpoint, we’re not currently seeing any signs that would suggest an impending issue, despite what may be reported in the news. We are keeping an eye on the situation. Fortunately, we don't have specific top-line targets to meet; we will adapt based on what makes sense moving forward. If the economy tightens, we will support our insurers as needed, but we’re not bound by any set targets for writing business. We will respond to the circumstances as they arise.

Okay, that's perfect. And one last question if I can. Different companies obviously have different property footprints, and a few competitors have reported greater weather-related losses in the second quarter, but it seems like you did not experience that. Can you provide a brief overview of how we should consider your current property exposure?

Sure. As I look at our Property exposure, we are countrywide, including Hawaii. And so we have exposure along the coastlines in California, in Hawaii. When it comes to kind of the middle of the country, where you see the conducted storm losses more frequently, because we don't have a large footprint in the habitational space, we're going to have less exposure to those kind of losses. So I think two things differentiate us from maybe what an average property book would look like. One would be our lack of emphasis on the habitational space. And we used to have a bigger footprint there, but that space has been underpriced for well over a decade. And I think the other factor is we write a lot of business on a named peril basis. So whether it's hurricane-only or earthquake-only coverage, it doesn't cover other perils. And so that might differentiate us from a potentially large perspective.

Okay. That’s exactly what I needed. Thank you so much.

Thanks, Meyer.

Our next question comes from Mark Dwelle with RBC. Mark, please go ahead.

Good morning. I have a few questions. First, regarding the Property segment, the growth has been significant. In your opening remarks, you mentioned adding policies opportunistically. Can you clarify whether that market is still growing, or if it is nearing its peak and might be more likely to decline rather than improve?

That's a nuanced point you're raising. From our perspective, it might still have a bit more room to grow, but it's challenging to articulate that. Currently, there doesn't seem to be an end in sight regarding potential competitors entering the market, and changes in the reinsurance market are also influencing this situation. These factors generally contribute to the continuation of this market. As we enter hurricane season, it will be interesting to observe the loss activity. If the season is quiet, people might become more relaxed. Conversely, if it's not quiet, it could increase pressure. We're adopting a wait-and-see approach and anticipate no significant changes until the hurricane season unfolds.

That's helpful. Regarding both the Property segment and the Casualty segment, are you noticing any shifts in buying behavior, such as people looking to reduce their limits or coverage to lower their effective insurance costs, or is everything remaining the same in terms of how people are purchasing coverage and their approach to it?

Well, I think you see two behaviors going on. One is, yes, people with the cost of the insurance are considering how much limit do they really need. And in places like earthquakes, that's been the case for a very long time. But I think it's also the case on the Casualty side. But at the same time we have places in our portfolio where the insurer has recognized that the litigation environment is active, and they want to have those limits available in case something happens. So that's a newer phenomenon I think that we've seen in the last 12 months or so where people continue to buy the limit. And when we expected in the past, in past cycles, they would have taken that limit and fill in if absolutely needed via a contract or some sort of situation. So, on a net basis, I don't know where that puts us. I think people continue to have an appetite to buy some coverage.

That's helpful. I mean, both on this call and other ones we've had, I mean there's a lot of talk about kind of the economic fortitude of the commercial customer whether they're beginning to see stress from weather inflation or a slowdown in the economy or what have you. So is there any additional color related to points like that?

So I think I would agree with what you're saying there. You look at some of these insurers who've survived COVID, and they're still in business and they've had their revenues starting to rebound. But the cost of everything has gone up from labor to whatever their cost of goods sold is made up of, and then insurance as well. So, pretty much everything costs more. They're trying to charge more. How much will the market bear? It's a tough situation to be a small business owner these days.

Okay. Thanks for the color. And then maybe one last question, maybe for Craig. I haven't heard his voice in this call. Can you give any kind of update just on the timing of when Maui Jim might land? I mean you've left a pretty big landing strip anywhere from tomorrow to Christmas. Any update there or maybe any update on how you're thinking about proceeds and where that leaves you?

Actually it's tomorrow till New Year's Eve but there's really no real update. I mean we still expect it to flow in the second half of the year.

Okay. Let me ask a semi-related question.

I hope that is helpful.

I understand your question. When considering your approach to dividends and capital return, how much do you take into account comprehensive income, which is currently negative on a year-to-date basis, compared to operating income or ordinary GAAP net income, which are both relatively favorable?

I'll begin, and Todd will likely provide additional insights. We need to assess our capital position and determine how much we require to continue our business growth, taking into account the current operating environment. This assessment is guided by our own capital requirements as well as the evaluations from rating agencies, which consider comprehensive income and its effect on our capital position relative to their models. We also evaluate our current status and how much capital is necessary for business expansion, as well as potential opportunities available to us. We are keen on continuing our growth, and if additional capital is required for that, we can retain it. Historically, if we do not need it, we've typically returned it as dividends. Todd, would you like to add anything?

I believe you covered the key points well. We consider everything in our total capital position, which consists of both fixed income and equity. We also take into account the perspectives of rating agencies, some of which are based on GAAP and others on statutory measures that don't factor in unrealized losses from the fixed income portfolio. Additionally, we conduct our own stress tests. We will assess the future outlook for our premiums and have been using our capital to support growth, which has always been our preferred approach. We review everything quarterly and make decisions based on that analysis.

Given how much more property you've been writing this year, would you think that you are comparatively more capital constrained in the eyes of the rating agencies at this point, or the reinsurance buying that you've done has left you in about the same place?

Yes, it really comes down to our entire product portfolio. Sometimes we receive more recognition from the rating agencies for the diversity of our portfolio. The Casualty business has seen significant growth this year as well. The reinsurance on the Property side supports our net position regarding the capital we require. There is certainly a collectability concern with reinsurance, but we work with very secure reinsurers. Some of the groups that backed us in May are quite stable, and we do not anticipate any issues there. We evaluate our entire portfolio to determine where we might be utilizing capital and identify areas that are experiencing growth.

I want to clarify my response to your question. I do not think that CAT has significantly raised our capital requirements for any of the models we have used. We have effectively managed our net exposure to minimize impact over time. Therefore, the need for additional capital is not really being driven by this.

Okay. Thanks very much for all the answers. I'll just stay on the edge of my seat for the Maui Jim announcement.

Our next question comes from Jamie Inglis from Philo Smith. Jamie, please go ahead.

Hello. Good morning, folks. Great quarter. Really great quarter. I want to say that first off. I wonder if we could revisit this issue about inflation as it relates to reserve development. I should say right up front I'm not worried about your reserves but what I'm trying to understand is what do you really mean by looking at longer-term loss trends? I mean the inflation we've seen in the last year or so is dramatically higher than it was five years ago, 10 years ago, whatever. So what is – what do you really mean when you're talking about longer-term loss trends? I mean how does – what does that mean?

This is Todd. The reference is specifically regarding Casualty. I will elaborate on that. I may not have been clear. On the property and surety side, which has a shorter timeline, the impacts will be felt rather quickly. For example, in the first quarter of last year during the Texas freeze, we anticipated and recorded higher reserves initially due to inflation affecting costs for necessary repairs, such as increased lumber prices. That impact will become apparent soon. From a Casualty standpoint, we are considering not only inflation but also other factors that influence loss trends. If we adopt a long-term perspective on loss cost trends, it will incorporate inflation among other influences. Currently, our actuaries are not observing significant changes yet. However, if we fall behind due to inflation or overall loss cost trends in Casualty, we could end up missing several years' worth of adjustments before realizing it. Therefore, we are paying closer attention to inflation and loss cost trends in the Casualty segment, although we have not seen notable effects thus far.

I want to emphasize that information is crucial, particularly real-time information, especially in an environment where costs may be rising. We have an effective feedback system between our claims and underwriting teams. We heavily invest in our claims team, who work diligently to raise reserves and ensure underwriters receive information promptly. If they observe any significant issues in the field, they communicate that to the underwriters. Given the various interests we manage, it's challenging to attribute specific loss cost inflation to any product based solely on severity, as this tends to take time. However, we generally have shorter tail lines compared to many specialty firms in the industry since we don't engage much in excess liability business, and we handle this aspect well. In the short term, we've noticed very favorable frequency trends, and as Todd mentioned, there haven't been any significant severity issues so far. Our team comprises prudent individuals who apply sound judgment, and it would be unwise to assume they aren't considering these factors in their decision-making. That's the perspective I wanted to share.

Okay. Craig, could you expand on your earlier point about disruption? Your company continues to show strong growth, but many of the changes that have taken place, such as those related to Lloyd's or the realignment of US companies regarding what they want to underwrite, have been ongoing for some time. Is there anything new or different in terms of disruption that you can capitalize on right now, or is it just more of the same?

I would say that with our team in place, we are very close to the situation. Their appetite in the Property segment has changed significantly, as Jen mentioned. This has also been true in the admitted markets, especially in Florida, where the ratings and lack of reinsurance support have impacted appetite. In some of our personal excess liability businesses, we are seeing shifting appetites, which presents us with opportunities to invest and reinvest in historically profitable businesses. This trend is also evident in some excess liability areas and certain geographies on the E&S side. We have confidence because our same people, underwriters, and claims teams have been consistent over the years, and they are now recognizing opportunities where others are hesitant. While we are not venturing into new businesses, we trust our experienced team, which has performed well in both favorable and challenging market cycles. There are still opportunities in the Marine sector. You mentioned Lloyd's, and there are many changes in appetite happening there as well. Our Marine business consists of about 12 sub-segments, each with different classes, making it complex to articulate at a detailed level.

Okay great. Good job, Thanks.

Thanks, James.

Our next question comes from Casey Alexander with Compass Point. Casey, please go ahead.

Yes. Good morning. Thank you. And I apologize for continuing to harp on the Southeast property market, but it is a market that has a lot of really unique attributes. And so I think you were speaking to one of my questions, which is how do you acquire a team that has deep experience in underwriting in those Southeast property markets, where other teams that are supposedly capable have failed in the past? And then the second part of my question is, a big problem for participants in the Southeast property market has been acquiring reinsurance on a cost-effective basis, the cost of reinsurance to reinsure those risks in that market have absolutely blown out. Is it RLI's overall financial strength that allows them to attract credible reinsurance counterparties and write reinsurance on a cost-effective basis to cover your exposure in those markets?

I’m a bit distracted by a plane taking off, but I’ll address your questions. First, regarding staffing, we've brought on new hires in that region and other areas, specifically focusing on both underwriting and claims expertise. It's crucial to consider both aspects. We've seen some success, especially as competitors have pulled back, creating opportunities for those looking for jobs in property writing, often from other companies. We aim to present our unique RLI approach, which differs from others. Our underwriters have access to extensive information and tools, and we offer significant oversight to ensure they understand how we emphasize the details concerning terms, conditions, and exposure. We also connect them with claims professionals who provide insights on the claims process, helping us address issues effectively from both underwriting and claims perspectives. This approach sets us apart. Additionally, we provide detailed reports to each underwriter, enabling them to understand their monthly contributions to our portfolio, which is not typical of other companies. From a reinsurance perspective, we seek differentiation in the marketplace due to our strong long-term performance in the property market since the early 1980s. We have consistently excelled at estimating catastrophe losses without significant discrepancies. In discussions with our reinsurance partners, we prioritize transparency about the situation and ensure our estimates reflect the potential losses from catastrophic events. Our solid track record in performance justifies our differentiation strategy, which includes allowing reinsurers to interact with our claims personnel to gain clarity on our claims handling process. This level of transparency in our reporting aids us in securing reasonable reinsurance terms. While we’ve managed to acquire reinsurance even in challenging conditions, we must continue to perform well to maintain that support. I hope I’ve addressed both aspects of your question.

Yeah. Okay. I appreciate that. Thank you for taking my question.

If there are no further questions, I will now turn the conference over to Mr. Craig Kliethermes for some closing remarks.

Thanks everyone for joining us this morning. I'm very proud of the unique culture that we have at RLI, and we believe it is built to deliver both to our customers and our shareholders. We look forward to talking with you next quarter. Until then, may we all enjoy fair winds following seas.

Ladies and gentlemen, if you wish to access the replay for this call, you may do so by dialing 1866-813-9403 with an ID number of 268510. This concludes our conference for today. Thank you all for participating and have a nice day. All parties may now disconnect.