A Publication of WTVP

The senior vice president and chief financial officer at RLI, Joe Dondanville grew up in Alton, Illinois, the eighth of nine children. He attended Catholic grade school and high school and graduated from Creighton University in Omaha, Nebraska. Raised to be independent, all of Dondanville’s siblings are college-educated and spread across the country, with no two living in the same place. He grew up playing sports, hunting and fishing, and has a current passion for golf. Dondanville was associated with Arthur Andersen & Co. before joining RLI in 1984 as chief accountant. He was promoted to CFO in 1992 and to his current position as senior vice president in 2002.

You began your career with RLI in 1984 as chief accountant and have progressed to your current position as CFO and senior vice president. Tell about your responsibilities today.

I oversee the financial accounting, tax, treasury, investor relations and actuarial functions of the company. Most visible is the production of the annual report to shareholders and filings with the SEC, which includes the accountability for the preparation, integrity and objectivity of financial statements issued by the company, including establishing and maintaining an appropriate system of internal controls throughout the company’s operations. Sarbanes-Oxley Section 404, which places added emphasis on documenting and testing of internal controls, has been a major focus for the company the past couple of years.

Tell how RLI has changed its focus throughout the years.

Our focus has not changed. We remain committed to providing high-quality products and services and to achieve an underwriting profit. What has changed is the scope of products we offer. RLI began in 1965 exclusively as an insurer of contact lenses. Since the advent of disposable lenses, this product has been discontinued. We have expanded into property, casualty and surety coverage, written through 25 underwriting offices around the country. Last year we wrote nearly $800 million in premiums in all 50 states. Our insurance ranges from highly automated, self-underwriting products to highly complex, individually underwritten coverages. Our customers are businesses and individuals throughout the United States.

What are the various insurance lines that RLI carries?

RLI offers a portfolio of very different and unique products. Casualty products include commercial automobile, general liability, umbrella/excess liability, directors and officers liability, employers indemnity, employment practices liability, fiduciary liability, personal umbrella liability and products liability. Property products include catastrophe-exposed coverages for earthquake and hurricanes, other hard-to-place commercial property coverages and marine insurance and homeowners in Hawaii. The surety segment writes commercial bonds, contract bonds, court, license and permit bonds, as well as energy-related bonds that provide coverage for capping and abandonment.

What is unique about RLI’s company culture?

We go to great lengths to hire the most talented people, empower them and then share profits with everyone. It’s an entrepreneurial culture where everyone has an added incentive to eliminate wasteful practices and keep a sharp eye on the bottom line.

RLI has outperformed many insurance companies in the last few years. To what do you attribute your company’s success?

RLI has an unwavering focus on underwriting profit. In the last 30 years, RLI has earned an underwriting profit in 26 years (including the last 11 years), while the insurance industry has achieved this benchmark only once. RLI is also distinguished by its financial strength. The company is rated A+ “Superior” by A.M. Best, the nation’s top insurance rating agency. This distinction is held by fewer than 10 percent of all U.S. property and casualty companies. Using the strong financial base of an A+-rated company, we have attracted some of the top underwriting talent in the country by sharing with them a portion of the underwriting profit on an unlimited basis. This profit sharing is unique in the insurance industry and has been the catalyst for our consistent record of out-performance.

Explain RLI’s connection with Maui Jim, of which you are a director.

RLI had developed an extensive sales and distribution infrastructure to support our ophthalmic products, and Maui Jim had a great product. It was the perfect combination. Therefore, in 1996, RLI Vision Corp. merged with Hester Enterprises, maker of Maui Jim sunglasses. RLI retains 41 percent ownership of Maui Jim. Maui Jim has done very well over the past decade and has earned a distinction as one of the top manufacturers of high-end sunglasses.

Peoria is still the home office of RLI. Why has the company continued to stay based in central Illinois?

Peoria is where our founder, Jerry Stephens, forged his career in the insurance business. But it’s also a wonderful quality-of-life city, with strong Midwestern values and a solid work force from which to draw. Entertainment, cultural outlets, quality schools and reasonable housing costs are all attractions. While we have strong underwriting representation around the country, there’s really no reason to relocate the home office.

How has technology assisted in the growth of RLI?

RLI has made a serious and long-range investment in computer technology to speed the policy completion process. We have given insurance agents and brokers access to this technology so they can write and bind policies in record time with minimal interference or interaction. Technology has also assisted our underwriters with programs to help evaluate risks. An earthquake simulation program, for example, allows RLI underwriters to simulate an earthquake of any magnitude at any given location to assess potential damage. We continue to leverage technology to make our business processes more efficient and customer focused.

How has Sarbanes-Oxley changed the way you do business?

The Sarbanes-Oxley Act of 2002 protects investors by providing a new level of corporate governance and accountability. Executive management and boards of directors must demonstrate that they have established and maintain an adequate internal control structure and procedures for financial reporting. SOX has certainly added cost to doing business—in RLI’s case, about $2 million incrementally. These costs come mostly from audit fees, staffing increases and board fees. RLI was already addressing some of the concerns of the Act and will continue to comply freely and thoroughly. We hope that some of our business processes become more efficient as a result, and perhaps there will be some cost offsets realized. But Sarbanes-Oxley has a beneficial effect on business as a whole. Companies that are dealing honestly will accept it as a reasonable cost of doing business. Others will suffer the consequences.

What misconceptions about RLI or the financial industry would you like to address?

One popular misconception is that insurance is a shady business, and that insurance companies try to avoid paying claims. The fact is that insurance is the most regulated business in the United States. State insurance commissioners and other regulatory bodies will investigate, pursue and prosecute any company that goes out of bounds. RLI can relate many gratifying stories from individuals made whole and businesses getting back to business after suffering debilitating losses. An insurance policy is a promise. By keeping our promises, we have won the trust and business of insureds, brokers and agents across the country.

What’s the best career advice you’ve ever received?

Very early in my career at RLI, Jerry Stephens said to me that to be a successful manager, you should always hire people who are smarter than you are. You can’t be promoted unless you have someone to take your place. This advice has been very easy to follow, and I have been successful because of the talented people I have working for me.

What future plans do you foresee for RLI?

RLI plans to continue growing the company and serving our customers. We are in business to manage risks for our customers so they can pursue their goals without fear of financial ruin. We also pledge to make RLI a prudent and reliable investment for our shareholders. Our business model has been quite successful. Combining it with guidance from our core values, we will seek new business opportunities, evaluate acquisitions and recruit outstanding talent to take us to the next level. We will stretch, but not overreach, play to our strengths and live up to our theme line, “Fundamentally Innovative.” IBI