RLI Q1 Earnings Call Highlights

Key Points

• RLI reported another quarter of underwriting profit with a combined ratio of 86 and 3% gross-premium growth, although operating EPS fell to $0.83 (GAAP $0.60) as catastrophe activity and equity-market unrealized losses weighed on results.
• Business mix was divergent: Casualty led growth (+10% GWP) driven by Personal Umbrella (+23%) and Transportation (+27%), while Property premiums declined ~9% amid E&S rate decreases; results were aided by $35.5M of favorable prior-year reserve development but offset by $16M of catastrophe losses.
• Investment and capital moves included a 15% rise in investment income but $39M of unrealized equity losses and a total portfolio return of -0.4%; RLI also raised $300M of 10-year debt at 5.375% and received an AM Best upgrade to A++.

RLI NYSE: RLI reported another quarter of underwriting profitability to open 2026, posting an 86 combined ratio and 3% growth in gross premiums written as higher investment income helped offset increased catastrophe losses and a more competitive pricing environment in several lines.

President and CEO Craig Kliethermes said the company “feel[s] good about how we’ve started 2026,” calling results “still excellent, but a bit more tempered” compared with a strong first quarter last year, primarily due to catastrophe activity and the “normal variability that comes with taking on insurance risk.” He also described a marketplace influenced by broker-owned facilities and MGAs and pointed to “rate acceleration and market disruption in wheels-based products” as an area of opportunity if approached with discipline.

Quarterly results and investment performance

Chief Financial Officer Aaron Diefenthaler said operating earnings were $0.83 per share, down from $0.89 in the year-ago quarter, reflecting “solid underwriting performance” and a 15% increase in investment income. On a GAAP basis, net earnings were $0.60 per share versus $0.68 last year.

Diefenthaler attributed the gap between operating earnings and GAAP net earnings to equity market performance, noting that the “largest driver of the differential” was a negative return in RLI’s equity portfolio and “$39 million of unrealized losses.” Total portfolio return was negative 0.4% for the quarter, with income partially offsetting price declines in both stocks and bonds. He added that fixed income purchase yields averaged 4.8%, about 60 basis points above the portfolio’s book yield, as the company focused on investment-grade fixed income amid market volatility.

Underwriting income totaled $58 million, supported by $35.5 million of favorable prior-year reserve development. This benefit was partially offset by $16 million of catastrophe losses and a higher underlying combined ratio, Diefenthaler said.

Segment performance: Casualty growth, property pressure, and variable surety results

RLI’s casualty segment led top-line growth. Diefenthaler said casualty gross premium grew 10%, driven by Personal Umbrella and Commercial Transportation, both benefiting from rate increases. The segment posted a 97 combined ratio, improving by two points year over year, and included $14.5 million of favorable prior-year reserve development that was “broad-based,” with contributions from Executive Products, General Liability, Professional Services, and Transportation. Of the quarter’s $16 million in catastrophe losses, $2 million was attributed to packaged businesses in Casualty.

Property gross premium declined 9% due largely to rate decreases in E&S Property, although Marine and Hawaii Homeowners provided offsets. Property produced a 62 combined ratio, supported by $20.6 million of favorable prior-year reserve development, which Diefenthaler said provided a 16-point benefit to the segment’s loss ratio. Property catastrophe losses totaled $14 million, including storms in Hawaii.

Surety gross premium was down about 1%, and the segment reported a 94 combined ratio. Diefenthaler noted results were affected by “limited favorable prior year development compared to a strong release last year,” emphasizing that surety loss activity can be volatile and meaningfully influence results over short periods.

Operational updates: Pricing, competition, and underwriting posture

COO Jennifer Klobnak said the company achieved “another quarter of underwriting profit” and maintained growth “even as market conditions have become more challenging.” She said casualty segment premium increased 10% and rates were also up 10%.

• Personal Umbrella: Premium grew 23% and the rate increase was 16%. Klobnak said RLI expects increases to continue as recent approvals earn into the book. She also described the company’s shift in new business away from “more hazardous states like California, Florida, and New York” to “less litigious states like those in the Midwest” following pricing, commission, and producer-management actions. On California specifically, she cited a 20% rate increase effective Dec. 1 and said growth continues but “at a much smaller pace” after additional underwriting actions, including a higher attachment point and selective commission reductions.
• Transportation: Premium increased 27%, with auto liability renewal rate increases up 15%. Klobnak said growth was driven by new business opportunities with insureds that invest in risk management and where RLI could achieve adequate returns. She added that submissions were up 15% as competitors pulled back in some classes, and new claim counts were down 14% versus the first quarter of 2025. In response to analyst questions about severity risk, Klobnak emphasized risk selection and said RLI still declines about 90% of transportation submissions.
• E&S Casualty and General Liability: E&S Casualty premium was down 4%, which Klobnak attributed to a slower start in binding amid economic and construction-industry uncertainty, despite submissions being up 14%. In the Q&A, she described construction activity in parts of the Northeast as “a bit paused,” with project starts delayed by weather and other factors; she said the pipeline was “full” with more quotes out, but binding can take 6–12 months for some accounts.

In property, Klobnak said E&S Property premium declined 16% as market capacity remained “plentiful.” She reported renewal rate change down 19% for hurricane and 16% for earthquake. She also said competition has increased from the admitted market, including programs targeting classes such as hotels and restaurants, and described competitors as sometimes waiving terms that RLI views as important to maintaining underwriting discipline.

Still, Klobnak said that while RLI is “giving back some rate,” accounts it binds are priced above technical benchmark pricing. She also noted reduced reinsurance costs and “manageable spring storm losses” supported results. In a later question on property net retention, Klobnak confirmed that an uptick was driven by lower reinsurance costs and said she did not anticipate “huge changes” in reinsurance for the remainder of the year.

Marine posted what Klobnak called its “largest premium quarter since inception,” with nearly $47 million in premium, up 4% year over year, alongside favorable reserve releases. Hawaii Homeowners premium and rates each rose 12% as the company responded to multiple Kona storm events using local claims staff, which she said can strengthen long-term relationships despite near-term impact on results.

In surety, Klobnak described a “very competitive” market, with contract and transactional lines showing single-digit growth offset by a small decline in commercial surety. She said one large contract surety loss from a prior-period claim affected results, calling it an isolated incident. Asked whether further adverse development is expected, she said RLI has reserved for “basically the worst-case scenario” and does not expect adverse development. In another exchange, management referenced a $5 million retention in relation to reinsurance for the surety loss.

Capital, cash flow, and ratings

Diefenthaler said operating cash flow was $43 million, down $60 million from the prior-year quarter, impacted by tax credit purchase activity, bonuses paid, and higher paid losses. He also highlighted that the tax credit purchase contributed to an 18.5% effective tax rate.

On financing, Diefenthaler said the company raised $300 million of long-term debt in late February with a 5.375% coupon and 10-year maturity, which he said returned leverage to its historic average. RLI also repaid and upsized its revolving credit facility with PNC Bank, increasing backstop liquidity at the parent to $150 million.

Adjusting comprehensive earnings for dividends, Diefenthaler said book value per share increased 2% from year-end 2025. He also noted AM Best upgraded the RLI group to A++.

In closing remarks, Kliethermes reiterated that the environment “presents both opportunity and temptation” and said RLI’s focus remains on underwriting discipline and willingness to step back when risk-adjusted returns do not meet expectations. “We’re optimistic,” he said, “not because the environment is easy, but because we know how to operate in environments like this.”

About RLI NYSE: RLI

RLI Corporation NYSE: RLI is a specialty property and casualty insurance company focused on underwriting niche risks for businesses and individuals. Headquartered in Peoria, Illinois, the company operates through a network of independent agents and brokers, offering customized coverage solutions. RLI's approach emphasizes disciplined underwriting, targeted product development and strong customer service to maintain profitability and long-term growth.

Founded in 1965 as Replacement Lens, Inc, RLI initially provided insurance for contact lens manufacturers before shifting its focus to specialty insurance in the 1980s.

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