RLI CORP

MANAGEMENT INCENTIVE PROGRAM (MIP)

Participants in the MIP include home office vice presidents, assistant vice presidents and other senior managers. Awards are granted annually and expressed as a percentage of year-end base pay based on targets for three financial goals and annual objectives related to strategic goals. The financial goals are: operating return on equity (“ROE”), combined ratio, and MVP. The annual objectives for 2024 were the same annual objectives for the MVP Program: customer focus (30 percent); continuous improvement (30 percent); community (30 percent); and success metrics (10 percent). Awards are based on actual results for the annual success metrics and an assessment of achievement of annual objectives as discussed above in relation to the MVP Program.

ROE and combined ratio are used as financial goals to provide an incentive to increase annual profitability. ROE is a ratio calculated as our operating earnings divided by our beginning equity adjusted for capital transactions such as share repurchases and special dividends. Operating earnings, in turn, are our net earnings minus realized investment gains or losses and unrealized gains or losses on equity securities, net of tax. For 2022 and 2023, the calculation of ROE excluded the net gain from the sale of Maui Jim subsequently received by the Company. Combined ratio is a profitability measure and is calculated as the sum of our incurred losses and settlement expenses plus our policy acquisition costs and operating expenses, divided by our net premiums earned. The difference between the combined ratio and 100 reflects the per-dollar rate of underwriting income or loss. MVP is used as a financial goal as a proxy for shareholder value creation and is explained beginning on page 37.

Actual awards for a year are paid in the first quarter of the following year. The HCCC approves award levels for MIP participants at the senior vice president and vice president levels, who are designated as executive officers under Section 16 of the Exchange Act. Mr. Kliethermes approves award levels for other MIP participants.

For 2024, Mr. Kliethermes recommended, and the HCCC approved, an MIP maximum annual incentive opportunity for Messrs. Diefenthaler and Fick of 100 percent of their respective year-end base, 40 percent of which will be based on the achievement of financial goals of MVP, 20 percent on the ROE goal, 20 percent on the combined ratio goal, and 20 percent on the achievement of annual objectives.

For 2024, targets levels and corresponding achievement levels for actual results for financial goals are measured according to the following proportionate payout ranges.

2024 MIP Maximum – Diefenthaler and Fick

In 2024, the following MIP awards were calculated based on the corresponding actual results with respect to financial goals and an aggregate 95% achievement of annual objectives based upon an assessment by senior management of achievement of each annual objective:

2024 MIP Award