RLI NYSE: RLI reported another quarter of profitable underwriting and higher investment income, with management emphasizing disciplined growth, capital returns and selectivity in increasingly competitive specialty insurance markets.
President and Chief Executive Officer Craig Kliethermes said the company generated an 86 combined ratio, grew gross premiums written by 3%, increased net investment income by 17% and produced a 25% return on equity during the second quarter. He also noted that RLI returned capital to shareholders through both a special dividend and share repurchases.
“Markets change; our principles don’t,” Kliethermes said, pointing to underwriting discipline, relationships with producers and insureds, and capital management as key drivers of the company’s performance.
Operating Earnings Edge Higher as Investment Income Rises
Chief Financial Officer Aaron Diefenthaler said RLI reported second-quarter operating earnings of $0.83 per share, compared with $0.82 per share in the prior-year period. On a GAAP basis, net earnings were $1.82 per share, up from $1.34 per share a year earlier.
The gap between operating and net earnings was largely driven by the company’s equity portfolio. Diefenthaler said RLI recognized $103 million of unrealized gains on equity securities in the quarter, compared with $44 million last year. Realized gains totaled $9 million, which he described as reflecting modest portfolio rebalancing.
Underwriting income was $59.9 million. The company’s combined ratio was 85.6, compared with 84.5 last year. The loss ratio improved by 0.4 percentage points to 45.5, while the expense ratio increased 1.5 points to 40.1 due to personnel-related costs, acquisition expenses and technology investments.
Results included $39.8 million of favorable development on prior-year loss reserves, compared with $27.6 million in the second quarter of 2025. The quarter also included $10 million of net incurred losses from 2026 catastrophe events.
Net investment income increased 17% to $46 million. Diefenthaler said operating cash flow of $145 million supported fixed-income purchases with yields averaging 4.9% during the quarter. Total investments and cash were approximately $4.9 billion at quarter-end.
Casualty Growth Led by Umbrella and Transportation
Chief Operating Officer Jen Klobnak said casualty premium rose 11% in the quarter, with rates up 10%. Personal umbrella and transportation were the primary drivers.
Personal umbrella premium increased 26%, supported by a 17% rate increase. Klobnak said the rate increase was influenced by higher approved rate filings in California and Florida, though she expects rate increases in the second half of the year to moderate as some filings earn through the book. She said the company has also targeted growth in non-coastal states, which RLI views as more favorable from a litigation standpoint.
Transportation premium rose 19%, including an 8% rate increase. Klobnak said some accounts renewed at or near expiring pricing because of strong account performance and prior rate actions. She also said new claim counts continued to decline for the second consecutive year, contributing to management’s confidence and supporting a reserve release in the quarter.
Casualty brokerage premium declined 6% amid greater competition from other excess and surplus carriers, managing general agents and standard markets. Klobnak said producers and insureds are seeking broader coverage for less rate, while RLI is “picking our spots.”
The casualty segment posted a 99.3 combined ratio, helped by $13 million of favorable development on prior-year reserves. Diefenthaler said contributors to favorable development included excess liability, transportation, the Professional Services Group and Executive Products.
Property Premium Declines as Competition Increases
RLI’s property segment produced a 56.8 combined ratio, benefiting from lighter catastrophe activity and favorable prior-year development. Property gross premium fell 6% as competitive dynamics persisted in the excess and surplus property market.
Klobnak said the market has become increasingly competitive, with some submissions being sent to more than 45 markets. She said standard markets are re-entering classes they exited during the recent hard market and offering broader terms for less premium.
Despite rate pressure, Klobnak said RLI’s underwriters are still achieving pricing near the company’s benchmark, which she said equates to its targeted risk-adjusted return. She said the company is holding the line on terms and conditions that will matter when claims are handled after losses occur. Renewal retention in property has declined to just under 70%.
Hawaii homeowners premium grew 9%, including a 12% rate increase. Marine premium increased 7%, including a 1% rate increase, in what Klobnak described as an increasingly competitive market.
Surety Premium Falls, but Underwriting Remains Profitable
Surety premium declined 6% in the quarter. Klobnak attributed the decline primarily to moderating renewable energy construction activity, customs bonds that required larger limits last year, and RLI’s decision to exit some larger accounts where management no longer believed risk-adjusted returns justified the exposure.
The surety segment posted an 87.2 combined ratio, modestly better than last year and supported by $3.4 million of favorable development. Diefenthaler said the loss ratio improvement was partly offset by a three-point increase in the expense ratio due to infrastructure investments and higher acquisition expenses.
Klobnak said surety loss ratios are beginning to move higher across the industry, particularly in construction and some renewable energy projects, though she said RLI has not seen those losses in its own book. She said the company wants to keep its book “clean” so it can take advantage of opportunities if market disruption develops.
Capital Returns Include Special Dividend and Buybacks
RLI paid a regular quarterly dividend of $0.18 per share and a $2.00 special dividend, returning just over $200 million to shareholders. The company also authorized a new $250 million share repurchase program.
Diefenthaler said RLI repurchased approximately 235,000 shares during the quarter at an average price of $51.25. About $238 million remained available under the authorization at June 30. He described buybacks as a complementary way to return capital, not necessarily a replacement for special dividends, and said there is no set timetable for using the remaining authorization.
Comprehensive earnings were $166 million, or $1.80 per share, compared with $143 million, or $1.55 per share, last year. Adjusting for dividends and share repurchases, book value per share increased 11% from year-end 2025.
Management also emphasized service and relationships as competitive advantages. Klobnak said RLI is using technology to improve efficiency but continues to prioritize direct engagement with producers and insureds. Kliethermes said the company’s culture is built around ownership and long-term value creation, adding that RLI will invest when it can generate attractive returns and return capital when it cannot.
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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