A.M. Best Assigns Debt Rating to RLI Corp.’s Senior Notes

December 10, 2003

A.M. Best Co. has assigned a senior debt rating of “bbb+” to RLI Corp.’s proposed issuance of $100 million of 5.95% 10 year senior unsecured notes due 2014. The outlook for the rating is positive.

RLI is expected to contribute $50 million to its insurance subsidiaries by year-end 2003. This capital contribution will be used to fund ongoing insurance operations as well as anticipated growth in premium volume. The remainder of the proceeds will be held at the holding company for general corporate purposes.

The financial strength ratings of “A” (Excellent) of RLI Group and the financial strength rating of “A-” (Excellent) of Planet Indemnity Company are unaffected by this action. A.M. Best affirmed the ratings and assigned a positive outlook to the RLI Group on June 13, 2003. All the companies are located in Peoria, Ill.

The debt rating reflects the RLI Group’s moderate financial leverage with proforma total debt to capital of 26%, strong and stable earnings and cash coverage of holding company obligations, and the financial flexibility afforded by being publicly-traded as well as the sustained operating profitability and excellent capitalization of its operating subsidiaries. It also takes into consideration the successful common stock offering by RLI earlier in 2003 and its continued explicit support of RLI Group (via a $117 million capital contribution). RLI Group benefits from its specialty insurance solutions approach, extensive product offerings and local branch office network.

As part of its strategy, RLI provides insurance solutions to market segments that are generally underserved by the standard market due to their unique risk characteristics. Business is written on an admitted and excess and surplus lines basis. Despite intense competition in recent years, RLI continues to demonstrate its ability to generate strong operating results through strict underwriting discipline and, more recently, from rate increases.

Additionally, RLI Group benefits from its high risk, high reward property (difference in conditions) business which, over the years, has provided a disproportionate share of RLI’s earnings. Management attributes a portion of its success to RLI’s expertise in commercial earthquake insurance, the use of advanced technology and aggregate risk management.

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