Company Quick10K Filing
RLI
Price93.81 EPS3
Shares45 P/E36
MCap4,254 P/FCF23
Net Debt85 EBIT149
TEV4,339 TEV/EBIT29
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-07-24
10-Q 2020-03-31 Filed 2020-04-28
10-K 2019-12-31 Filed 2020-02-21
10-Q 2019-09-30 Filed 2019-10-24
10-Q 2019-06-30 Filed 2019-07-25
10-Q 2019-03-31 Filed 2019-04-24
10-K 2018-12-31 Filed 2019-02-22
10-Q 2018-09-30 Filed 2018-10-24
10-Q 2018-06-30 Filed 2018-07-20
10-Q 2018-03-31 Filed 2018-04-25
10-K 2017-12-31 Filed 2018-02-23
10-Q 2017-09-30 Filed 2017-10-25
10-Q 2017-06-30 Filed 2017-07-26
10-Q 2017-03-31 Filed 2017-04-27
10-K 2016-12-31 Filed 2017-02-24
10-Q 2016-09-30 Filed 2016-10-24
10-Q 2016-06-30 Filed 2016-07-25
10-Q 2016-03-31 Filed 2016-04-25
10-K 2015-12-31 Filed 2016-02-26
10-Q 2015-09-30 Filed 2015-10-23
10-Q 2015-06-30 Filed 2015-07-24
10-Q 2015-03-31 Filed 2015-04-24
10-K 2014-12-31 Filed 2015-02-26
10-Q 2014-09-30 Filed 2014-10-27
10-Q 2014-06-30 Filed 2014-07-28
10-Q 2014-03-31 Filed 2014-04-28
10-K 2013-12-31 Filed 2014-02-27
10-Q 2013-09-30 Filed 2013-10-28
10-Q 2013-06-30 Filed 2013-07-29
10-Q 2013-03-31 Filed 2013-04-29
10-Q 2012-06-30 Filed 2012-07-30
10-Q 2012-03-31 Filed 2012-04-30
10-K 2012-01-31 Filed 2012-02-28
10-Q 2011-09-30 Filed 2011-10-31
10-Q 2011-06-30 Filed 2011-08-05
10-Q 2011-03-31 Filed 2011-04-28
10-K 2010-12-31 Filed 2011-02-25
10-Q 2010-09-30 Filed 2010-10-26
10-Q 2010-06-30 Filed 2010-07-28
10-Q 2010-03-31 Filed 2010-04-26
10-K 2009-12-31 Filed 2010-02-24
8-K 2020-07-23 Regulation FD, Exhibits
8-K 2020-07-22 Earnings, Exhibits
8-K 2020-05-07
8-K 2020-05-07
8-K 2020-05-07
8-K 2020-04-22
8-K 2020-04-21
8-K 2020-03-26
8-K 2020-02-13
8-K 2020-01-23
8-K 2020-01-22
8-K 2019-11-13
8-K 2019-10-17
8-K 2019-10-16
8-K 2019-08-21
8-K 2019-08-14
8-K 2019-07-18
8-K 2019-07-17
8-K 2019-06-10
8-K 2019-05-02
8-K 2019-05-02
8-K 2019-04-18
8-K 2019-04-17
8-K 2019-02-07
8-K 2019-01-24
8-K 2019-01-23
8-K 2018-11-08
8-K 2018-11-08
8-K 2018-10-18
8-K 2018-10-17
8-K 2018-08-15
8-K 2018-08-15
8-K 2018-08-14
8-K 2018-07-19
8-K 2018-07-18
8-K 2018-05-24
8-K 2018-05-03
8-K 2018-05-03
8-K 2018-04-19
8-K 2018-04-18
8-K 2018-02-08
8-K 2018-01-25
8-K 2018-01-24

RLI 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1.Legal Proceedings - There Were No Material Changes To Report. Item 1A. Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds -
Item 3. Defaults Upon Senior Securities - Not Applicable. Item 4.Mine Safety Disclosures - Not Applicable. Item 5.Other Information - Not Applicable.
EX-10.1 rli-20200630ex1010e5946.htm
EX-10.2 rli-20200630ex10282e72d.htm
EX-31.1 rli-20200630ex311f9fbeb.htm
EX-31.2 rli-20200630ex31274de08.htm
EX-32.1 rli-20200630ex321402078.htm
EX-32.2 rli-20200630ex32236e912.htm

RLI Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
3.62.92.21.40.70.02012201420172020
Assets, Equity
0.30.20.20.10.10.02012201420172020
Rev, G Profit, Net Income
0.20.10.0-0.0-0.1-0.22012201420172020
Ops, Inv, Fin

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Table of Contents

13

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2020

or

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                 to                

Commission File Number: 001-09463

RLI Corp.

(Exact name of registrant as specified in its charter)

Delaware

37-0889946

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Number)

9025 North Lindbergh Drive, PeoriaIL

61615

(Address of principal executive offices)

(Zip Code)

(309) 692-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock $0.01 par value

RLI

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes     No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes     No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes    No

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of July 16, 2020, the number of shares outstanding of the registrant’s Common Stock was 44,952,602.

Table of Contents

Table of Contents

Page

Part I - Financial Information

3

Item 1.

Financial Statements

3

Condensed Consolidated Statements of Earnings and Comprehensive Earnings For the Three and Six-Month Periods Ended June 30, 2020 and 2019 (unaudited)

3

Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019 (unaudited)

4

Condensed Consolidated Statements of Shareholders’ Equity For the Three and Six-Month Periods Ended June 30, 2020 and 2019 (unaudited)

5

Condensed Consolidated Statements of Cash Flows For the Six-Month Periods Ended June 30, 2020 and 2019 (unaudited)

6

Notes to Unaudited Condensed Consolidated Interim Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

37

Item 4.

Controls and Procedures

37

Part II - Other Information

38

Item 1.

Legal Proceedings

38

Item 1a.

Risk Factors

38

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

38

Item 3.

Defaults upon Senior Securities

38

Item 4.

Mine Safety Disclosures

38

Item 5.

Other Information

38

Item 6.

Exhibits

38

Signatures

39

2

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

RLI Corp. and Subsidiaries

Condensed Consolidated Statements of Earnings and Comprehensive Earnings

(Unaudited)

For the Three-Month Periods

For the Six-Month Periods

Ended June 30,

Ended June 30,

(in thousands, except per share data)

2020

2019

2020

2019

Net premiums earned

   

$

208,734

    

$

207,541

$

424,316

$

412,230

Net investment income

 

16,917

 

16,998

 

34,695

 

33,563

Net realized gains (losses)

 

(2,109)

 

4,764

 

13,043

 

13,832

Net unrealized gains (losses) on equity securities

74,705

8,810

(55,690)

42,308

Consolidated revenue

$

298,247

$

238,113

$

416,364

$

501,933

Losses and settlement expenses

 

101,202

 

103,919

 

212,223

 

198,216

Policy acquisition costs

 

69,463

 

71,742

 

142,404

 

143,034

Insurance operating expenses

 

13,906

 

16,948

 

28,287

 

33,615

Interest expense on debt

 

1,903

 

1,861

 

3,800

 

3,722

General corporate expenses

 

1,994

 

3,283

 

3,749

 

6,559

Total expenses

$

188,468

$

197,753

$

390,463

$

385,146

Equity in earnings of unconsolidated investees

 

5,100

 

8,468

 

9,614

 

13,782

Earnings before income taxes

$

114,879

$

48,828

$

35,515

$

130,569

Income tax expense

 

22,713

 

8,361

 

4,616

 

24,629

Net earnings

 

$

92,166

 

$

40,467

$

30,899

$

105,940

Other comprehensive earnings, net of tax

 

53,571

 

27,864

 

40,540

 

57,165

Comprehensive earnings

 

$

145,737

 

$

68,331

$

71,439

$

163,105

Earnings per share:

Basic:

Basic net earnings per share

 

$

2.05

 

$

0.91

$

0.69

$

2.37

Basic comprehensive earnings per share

 

$

3.24

 

$

1.53

$

1.59

$

3.66

Diluted:

Diluted net earnings per share

 

$

2.04

 

$

0.89

$

0.68

$

2.35

Diluted comprehensive earnings per share

 

$

3.22

 

$

1.51

$

1.58

$

3.62

Weighted average number of common shares outstanding:

Basic

 

44,951

 

44,704

 

44,936

 

44,620

Diluted

 

45,274

 

45,219

 

45,311

 

45,056

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

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RLI Corp. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

June 30,

December 31,

(in thousands, except share and per share data)

 

2020

 

2019

ASSETS

  

  

Investments and cash:

Fixed income:

Available-for-sale, at fair value

 

$

2,075,093

 

$

1,983,086

(amortized cost of $1,956,137 and allowance for credit losses of $985 at 6/30/20)

(amortized cost of $1,915,278 and allowance for credit losses of $0 at 12/31/19)

 

 

Equity securities, at fair value (cost - $270,987 at 6/30/20 and $262,131 at 12/31/19)

 

422,198

 

460,630

Other invested assets

63,440

70,441

Cash

 

84,797

 

46,203

Total investments and cash

$

2,645,528

$

2,560,360

Accrued investment income

 

15,142

 

14,587

Premiums and reinsurance balances receivable, net of allowances for uncollectible amounts of $17,139 at 6/30/20 and $16,682 at 12/31/19

 

154,941

 

160,369

Ceded unearned premium

 

93,679

 

93,656

Reinsurance balances recoverable on unpaid losses and settlement expenses, net of allowances for uncollectible amounts of $8,035 at 6/30/20 and $9,402 at 12/31/19

 

364,756

 

384,517

Deferred policy acquisition costs

 

87,560

 

85,044

Property and equipment, at cost, net of accumulated depreciation of $65,762 at 6/30/20 and $62,703 at 12/31/19

 

52,350

 

53,121

Investment in unconsolidated investees

 

112,662

 

103,836

Goodwill and intangibles

 

53,923

 

54,127

Other assets

 

38,738

 

36,104

TOTAL ASSETS

 

$

3,619,279

 

$

3,545,721

LIABILITIES AND SHAREHOLDERS’ EQUITY

Liabilities

Unpaid losses and settlement expenses

 

$

1,590,996

 

$

1,574,352

Unearned premiums

 

543,113

 

540,213

Reinsurance balances payable

 

24,777

 

25,691

Funds held

 

84,430

 

83,358

Income taxes-deferred

 

57,421

 

56,727

Bonds payable, long-term debt

 

149,395

 

149,302

Accrued expenses

 

35,998

 

66,626

Other liabilities

 

81,691

 

54,064

TOTAL LIABILITIES

 

$

2,567,821

 

$

2,550,333

Shareholders’ Equity

Common stock ($0.01 par value)

(Shares authorized - 200,000,000 at 6/30/20 and 100,000,000 at 12/31/19)

(67,882,816 shares issued, 44,952,602 shares outstanding at 6/30/20)

(67,799,229 shares issued, 44,869,015 shares outstanding at 12/31/19)

$

679

$

678

Paid-in capital

 

325,862

 

321,190

Accumulated other comprehensive earnings

 

93,035

 

52,473

Retained earnings

 

1,024,881

 

1,014,046

Deferred compensation

 

7,600

 

7,980

Less: Treasury shares at cost

(22,930,214 shares at 6/30/20 and 12/31/19)

 

(400,599)

 

(400,979)

TOTAL SHAREHOLDERS’ EQUITY

$

1,051,458

$

995,388

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

3,619,279

 

$

3,545,721

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

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RLI Corp. and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity

(Unaudited)

   

   

   

   

   

Accumulated

   

   

   

 

Total

Other

Common

Shareholders’

Common

Paid-in

Comprehensive

Retained

Deferred

Treasury

(in thousands, except share and per share data)

Shares

Equity

Stock

Capital

Earnings (Loss)

Earnings

Compensation

Shares at Cost

Balance, January 1, 2019

 

44,504,043

$

806,842

$

674

$

305,660

$

(14,572)

$

908,079

$

8,354

$

(401,353)

Net earnings (loss)

 

65,473

65,473

Other comprehensive earnings (loss), net of tax

 

 

29,301

 

 

 

29,301

 

 

 

Deferred compensation

 

 

 

 

 

 

 

(1,039)

 

1,039

Share-based compensation

 

50,213

 

2,892

 

1

 

2,891

 

 

 

 

Dividends and dividend equivalents ($0.22 per share)

 

 

(9,803)

 

 

 

 

(9,803)

 

 

Balance, March 31, 2019

 

44,554,256

$

894,705

$

675

$

308,551

$

14,729

$

963,749

$

7,315

$

(400,314)

Net earnings (loss)

 

40,467

40,467

Other comprehensive earnings (loss), net of tax

 

 

27,864

 

 

 

27,864

 

 

 

Deferred compensation

 

 

 

 

 

 

 

215

 

(215)

Share-based compensation

 

232,941

 

7,217

 

2

 

7,215

 

 

 

 

Dividends and dividend equivalents ($0.23 per share)

 

 

(10,305)

 

 

 

 

(10,305)

 

 

Balance, June 30, 2019

 

44,787,197

$

959,948

$

677

$

315,766

$

42,593

$

993,911

$

7,530

$

(400,529)

   

   

   

   

   

Accumulated

   

   

   

Total

Other

 

Common

Shareholders’

Common

Paid-in

Comprehensive

Retained

Deferred

Treasury

 

(in thousands, except share and per share data)

Shares

Equity

Stock

Capital

Earnings (Loss)

Earnings

Compensation

Shares at Cost

 

Balance, January 1, 2020

 

44,869,015

$

995,388

$

678

$

321,190

$

52,473

$

1,014,046

$

7,980

$

(400,979)

Cumulative-effect adjustment from ASU 2016-13

1,095

22

1,073

Net earnings (loss)

 

(61,267)

(61,267)

Other comprehensive earnings (loss), net of tax

 

 

(13,031)

 

 

 

(13,031)

 

 

 

Deferred compensation

 

 

 

 

 

 

 

(1,010)

 

1,010

Share-based compensation

 

53,641

 

3,863

 

1

 

3,862

 

 

 

 

Dividends and dividend equivalents ($0.23 per share)

 

 

(10,343)

 

 

 

 

(10,343)

 

 

Balance, March 31, 2020

 

44,922,656

$

915,705

$

679

$

325,052

$

39,464

$

943,509

$

6,970

$

(399,969)

Net earnings (loss)

 

92,166

92,166

Other comprehensive earnings (loss), net of tax

 

 

53,571

 

 

 

53,571

 

 

 

Deferred compensation

 

 

 

 

 

 

 

630

 

(630)

Share-based compensation

 

29,946

 

810

 

 

810

 

 

 

 

Dividends and dividend equivalents ($0.24 per share)

 

 

(10,794)

 

 

 

 

(10,794)

 

 

Balance, June 30, 2020

 

44,952,602

$

1,051,458

$

679

$

325,862

$

93,035

$

1,024,881

$

7,600

$

(400,599)

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

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RLI Corp. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

For the Six-Month Periods

Ended June 30,

(in thousands)

2020

2019

Net cash provided by operating activities

    

$

83,773

    

$

105,347

Cash Flows from Investing Activities

Purchase of:

Fixed income securities, available-for-sale

$

(185,502)

$

(214,332)

Equity securities

(48,473)

(59,861)

Property and equipment

(3,413)

(3,004)

Other

(6,651)

(7,122)

Proceeds from sale of:

Fixed income securities, available-for-sale

40,333

132,153

Equity securities

52,533

33,360

Other

2,596

1,842

Proceeds from call or maturity of:

Fixed income securities, available-for-sale

121,911

52,113

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

 

-

 

(35,803)

Net cash used in investing activities

 

$

(26,666)

 

$

(100,654)

Cash Flows from Financing Activities

Cash dividends paid

 

$

(21,119)

 

$

(20,092)

Proceeds from stock option exercises

 

2,606

 

10,093

Net cash used in financing activities

 

$

(18,513)

 

$

(9,999)

Net increase (decrease) in cash

$

38,594

$

(5,306)

Cash at the beginning of the period

46,203

30,140

Cash at June 30

 

$

84,797

 

$

24,834

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

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. BASIS OF PRESENTATION

The unaudited condensed consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) for interim financial reporting and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. As such, these unaudited condensed consolidated interim financial statements should be read in conjunction with our 2019 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, 2020 and the results of operations of RLI Corp. and subsidiaries for all periods presented have been made. The results of operations for any interim period are not necessarily indicative of the operating results for a full year. Certain reclassifications were made to 2019 to conform to the classifications used in the current year.

The preparation of the unaudited condensed consolidated interim financial statements requires management to make estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated interim financial statements and the reported amounts of revenue and expenses during the period. These estimates are inherently subject to change and actual results could differ significantly from these estimates.

B. ADOPTED ACCOUNTING STANDARDS

ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

ASU 2016-13 was issued to provide more decision-useful information about the expected credit losses on financial instruments. Previous guidance delayed the recognition of credit losses until it was probable a loss had been incurred. This update requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected by means of an allowance for credit losses that is included in net earnings. Credit losses relating to available-for-sale debt securities are also required to be recorded through a reversible allowance for credit losses, but is limited to the amount by which fair value is less than amortized cost.

We adopted ASU 2016-13 on January 1, 2020 using the modified-retrospective approach. The standard applied to three of the Company’s balance sheet accounts: available-for-sale fixed income securities, premiums receivable and reinsurance balances recoverable. The impact of this standard was and is expected to continue to be immaterial, as our fixed income portfolio is weighted towards higher rated bonds (84 percent rated A or better at June 30, 2020 and 85 percent at December 31, 2019), we purchase reinsurance from financially strong reinsurers, we have a long history of collecting premium receivables through various economic cycles and we had previously maintained an allowance for uncollectible premium and reinsurance balances. In total, the cumulative-effect adjustment made to the balance sheet as of the beginning of the year resulted in a $1.1 million increase to retained earnings and an increase to accumulated other comprehensive earnings of less than $0.1 million.

C. REINSURANCE

Ceded unearned premiums and reinsurance balances recoverable on paid and unpaid losses and settlement expenses are reported separately as assets, instead of being netted with the related liabilities, since reinsurance does not relieve the Company of our legal liability to our policyholders. Such balances are subject to the credit risk associated with the individual reinsurer. We continuously monitor the financial condition of our reinsurers and actively follow up on any past due or disputed amounts. As part of our monitoring efforts, we review their annual financial statements, quarterly disclosures and Securities and Exchange Commission (SEC) filings for those reinsurers that are publicly traded. We also review insurance industry developments that may impact the financial condition of our reinsurers. We analyze the credit risk associated with our reinsurance balances recoverable by monitoring the AM Best and Standard & Poor’s (S&P) ratings of our reinsurers. Additionally, we perform an in depth reinsurer financial condition analysis prior to the renewal of our reinsurance placements.

Once regulatory action (such as receivership, finding of insolvency, order of conservation or order of liquidation) is taken against a reinsurer, the paid and unpaid balances recoverable from the reinsurer are specifically identified and charged to earnings in the form of an allowance for uncollectible amounts. We subject our remaining reinsurance balances receivable to detailed recoverability tests, including a segment-based analysis using the average default rating percentage by S&P rating, and

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record an additional allowance for unrecoverable amounts from reinsurers. This credit allowance is reviewed on an ongoing basis to ensure that the amount makes a reasonable provision for reinsurance balances that we may be unable to recover.

The allowances for uncollectible amounts on paid and unpaid reinsurance recoverables were $15.9 million and $8.0 million, respectively, at June 30, 2020. At December 31, 2019, the amounts were $15.7 million and $9.4 million, respectively. Adoption of ASU 2016-03 resulted in a $1.3 million decrease to the allowance for uncollectible amounts on reinsurance recoverables in 2020, while other 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 2020.

D. INTANGIBLE ASSETS

Goodwill and intangible assets totaled $53.9 million and $54.1 million at June 30, 2020 and December 31, 2019, respectively, as detailed in the following table:

Goodwill and Intangible Assets

June 30,

December 31,

(in thousands)

2020

2019

Goodwill

Energy surety

$

25,706

$

25,706

Miscellaneous and contract surety

15,110

15,110

Small commercial

5,246

5,246

Total goodwill

$

46,062

$

46,062

Intangibles