Gerald D. Stephens

Entrepreneur & Businessman
Photography by Kira Kwon

Gerald D. Stephens is the founder and retired chairman of the board of RLI Corp., a multi-line property-casualty company that writes a variety of specialty coverages throughout the United States. He was also chairman of the board of sunglass manufacturer, Maui Jim, Inc.

An alumnus of Peoria High School, he graduated from the University of Wisconsin in 1955 with an undergraduate major in insurance. He served in the U.S. Army after graduation, and received his CPCU designation in 1960. From 1958 to 1969, he was vice president of H.O. Stephens & Son, Co., a family-owned retail insurance agency. He founded Replacement Lens, Inc. in 1961 with Dr. Jerome Conlogue and RLI Corp. in 1965.

A member of numerous national and local boards, Stephens is founder and past president of the Central Illinois Chapter of CPCU and of the National Society of Chartered Property and Casualty Underwriters. He and his wife, Helen, have four adult children and seven grandchildren.

You worked in your father’s insurance agency and majored in insurance in college. Did you always know you wanted to get into this field?
After graduating from Peoria High School, I determined I wanted to go into the insurance business. I really wanted to be a pilot, but in those days, not having 20/20 eyesight kept me out of the Air Force ROTC. My father and two uncles were in the business, so I guess it was inherited.

Describe the beginnings of RLI in 1961. How did you become interested in the specialized area of contact lens insurance? Describe the process of developing a brand-new insurance product.
I researched colleges that offered undergraduate insurance majors, and there were only three at the time: Wisconsin, Pennsylvania and Georgia State. As Madison was closer to home, I selected the University of Wisconsin. Upon graduation, I spent two years as a first lieutenant in the infantry in Korea. I then went to work for my father, who was a retail agent in Peoria. I also became a private pilot and received my CPCU designation during those years.

While in college, I determined I wanted to be on the insurance company side of the business, but my father wanted me to join him in his agency. That was 1958.

Thinking out of the box, during the years that followed, I tried to come up with an idea that would allow me to start a specialty insurance company.

In 1959, I was fit with contact lenses. In those days they were rigid (hard) and easily lost and damaged. For the following two years, I kept making proposals to the optometrist that fit my lenses for a group plan to insure his patients. He kept turning me down, but eventually we came up with a plan together. In 1961, we incorporated Replacement Lens, Inc., an insurance agency to insure contact lenses. Our underwriter was West Bend Mutual Insurance Company. For the next five years, we lost money as an agent. Neither partner received any salary during those years.

Dr. Conlogue (then my partner) owned a small contact lens manufacturing company. He had around 30 doctors—clients for whom he manufactured contact lenses. In 1965, I sold stock to his doctors to create what is now known as RLI Corp. They paid less than ten cents a share (after splits). We raised $300,000.

With that money, we acquired a mutual insurance company charter for $100,000—it had $75,000 in assets at the time—and we spent the other $200,000 on a nationwide advertising campaign. We had written $100,000 in business in 1965. If the campaign failed, we were broke! Fortunately it succeeded, and we wrote $600,000 of business in 1965. More importantly, we broke into the black that year and have remained profitable since.

What were the challenges of going public?
By 1969, due to a Supreme Court rule, individual states could require an insurance company to be licensed to do a mail-order business. Before, you only needed to be licensed in your home state. We needed a minimum of $500,000 to apply in most other states. After a long search (most investment houses thought a contact lens insurance company was a crazy idea!), we finally found a small Wall Street broker who agreed to take us public. After a great many presentations up and down the canyons of New York City, we finally were able to sell $800,000 of stock and apply for licenses. By 1972, most states had increased their capital requirements to $1,200,000. At that time, we had only three additional state licenses. For the rest of the states, we were an agent for Sentry Insurance Company of Stevens Point, Wisconsin.

Then, a bit of luck. Bausch & Lomb got FDA approval for their soft lens. Our stock was limping along at eight dollars per share (the same price we sold the 1969 issue), and with this news, it went to $34 almost overnight. We went into registration for a new issue and sold $1,200,000 of stock at $18 per share. Bausch & Lomb announced just before our issue that it would compete with us by becoming an agent of an unaffiliated insurance company. So our stock went down, but not as fast as it went up, and we were happy to receive $18. We spent the next ten years getting our company admitted to all the states and starting other specialty insurance products. RLI’s market cap is around $1.4 billion, so I guess we have done a few things right.

When you developed your ESOP in 1973, this was not a common practice. What led you to add this benefit?
In 1972, I decided that in order to make sure our employees and shareholders were working together, we would try to find a way to make all our employees shareholders. This was before the ESOP law was passed. Ed Sutkowski, our attorney, came up with a novel “thrift plan” that matched employee contributions with RLI stock. When the ESOP law passed, the thrift plan was converted to an ESOP. We have generally contributed 15 percent of each employee’s salary to the plan every year since. As many of our people will tell you, over the years I have preached that the function of all RLI associates was to make the shareholders rich! And we have. Much to my satisfaction, RLI has been able over the years to retire many “wealthy” people.

Describe the distinct culture at RLI that you established. What do you think has changed most over the years? What has stayed the same?
Our contact lens days taught us the value of specializing in a single product. At one time, we provided over 80 percent of all the contact lens insurance in the nation. As lenses declined in cost, our insurance product became obsolete. We no longer insure contact lenses, but that organization lives on. We had great contact lens employees, and to ensure their future, we merged our contact lens subsidiary with a company called Maui Jim.

We have maintained our unique organization. Each of our current products has a leader who is one of the best underwriters in the nation in their specialty. We have over 28 offices with underwriters reporting to their manager wherever he may be located. Peoria handles the administration for our product leaders.

To what do you attribute RLI’s decades-long success?
People make any organization. We look for the best. We look closely at academic records and people skills. Productivity is very important. We are looking for better ways of doing things all the time. Our customer is king. We will succeed to the extent we make his or her life easier and more pleasant than our competition.

Tell us about your book Message of the Week, published in 2007.
The “Message of the Week” appeared on each workstation at RLI in the ‘90s on Monday morning. It was a way of communicating with all employees, as everybody in the company has a workstation. I would listen to tapes as I ran in the mornings, take some notes, and write the message on Saturday for Monday. After I retired, the messages were published in a book that was given to each employee.

Was it difficult for you to give up the reins of leadership at the company you founded and built?
Retiring was not difficult, as RLI over the years has developed an outstanding group of leaders and associates. I am quite proud of the current board of directors. All have been leaders in their own industries. Our executive group is seasoned. My successor has been with the company for over 29 years. It gives me a great deal of satisfaction to watch the company succeed and grow year after year.

Describe your day-to-day life since leaving RLI. What groups or projects have you spent time on?
I have spent time on several philanthropic activities in Peoria, Madison and Savannah, where we spend most of the winter these days.

Describe your involvement in nonprofit work and charitable organizations. What causes have you taken an interest in?
Over the years, I have been on many local and national boards. For example, I am past president of the national CPCU Society (Society of Chartered Property and Casualty Underwriters). It takes 10 exams to receive this designation. It is the equivalent of a master’s degree in property and casualty insurance. There are about 200 chapters and 24,000 members nationwide. I also served 10 years on the board of the American Institute for CPCU, the industry organization that gives the exams. I served on our trade association board and was chairman of the honors committee of the board of the International Insurance Society. That committee nominates laureates to be elected to the Insurance Hall of Fame.

Locally, I served on OSF Saint Francis Medical Center’s advisory board for 28 years, and was a Bradley trustee for 12 years. Other boards on which I have served have included: Jefferson Bank and Trust Company, Bank One Peoria, Country Club of Peoria, Creve Coeur Club, Fayette Companies and the Economic Development Council.

How do you relax in your free time? Have you picked up any hobbies since retiring?
Other than two golf games a week, I spend a lot of time on managing personal investments.

Looking back on your career, what accomplishment are you most proud of?
Helen and I are very fortunate we have a wonderful, successful family. Our four children are all doing well, and our seven grandchildren are something to behold. They are all in college except one, who will graduate from high school this year. All are excellent students with chosen careers well underway.

Have you considered the concept of legacy? What legacy do you wish to leave on this planet?
I believe we are put on earth to serve others. Our rewards in life are in direct proportion to the service we are able to provide. I would hope to be remembered as a servant of our family, our people at RLI, our customers and our community. Others may have done a better job than I, but I hope to be remembered as one who gave his all in this endeavor. iBi