RLI Q3 Earnings Call Highlights

Key Points

• RLI reported solid operating results: Third-quarter operating earnings rose to $0.86 per share from $0.82, supported by an 86.2% combined ratio, 13% growth in net investment income, and disciplined underwriting.
• Performance varied across specialty markets: Property remained strong with a 60.1% combined ratio, while E&S property, E&S casualty, and commercial transportation faced increased competition and declining premiums. Personal umbrella premiums grew 22%, led by higher rates.
• RLI maintained a conservative capital strategy: Operating cash flow increased 9% to $195 million, new investments targeted investment-grade fixed income yielding 5.5%, and the company repurchased nearly 104,000 shares while continuing its quarterly dividend.

RLI NYSE: RLI reported third-quarter operating earnings of $0.86 per share, up from $0.82 a year earlier, as underwriting profitability and higher investment income offset competitive conditions in several specialty insurance markets.

Chief Executive Officer Craig Kliethermes said the company produced an 86 combined ratio, grew gross premiums written by 2%, increased net investment income by 13%, and raised book value 10% from year-end 2025 after dividends and share repurchases. He attributed the results to disciplined underwriting across the company’s portfolio of specialty products.

“We don't need every opportunity,” Kliethermes said. “Across our diverse portfolio of niche specialty products, we will look for the right opportunities where expertise and risk selection gives us an advantage.”

Quarterly underwriting and investment results

Chief Financial Officer Aaron Diefenthaler said underwriting income totaled $58.8 million in the third quarter. The company’s combined ratio was 86.2%, compared with 85.1% in the prior-year quarter. The loss ratio increased 1.3 percentage points to 47.4%, while the expense ratio improved modestly to 38.8%.

Results included $22.9 million of favorable prior-year reserve development, compared with $15.5 million a year earlier. Current-year catastrophe losses were approximately $4 million, primarily in the property segment.

GAAP net earnings were $0.88 per share, down from $1.35 per share a year earlier. Diefenthaler said the decline primarily reflected changes in the value of equity securities between periods. RLI also recorded a comprehensive loss of $36.8 million, or $0.40 per share, as rising yields reduced bond prices. Net investment income rose 13% to $46.7 million.

Operating cash flow increased 9% to $195 million. The company concentrated new investments in investment-grade fixed income securities with average yields of 5.5%, nearly 100 basis points above its book yield, Diefenthaler said.

During the quarter, RLI paid its regular dividend of $0.18 per share and repurchased just under 104,000 shares at an average price of $60.51. About $232 million remained under the company’s repurchase authorization as of Sept. 30.

Property strength offsets softer E&S conditions

Property gross premiums declined about 1%, but the segment generated more than $50 million in underwriting income and posted a 60.1% combined ratio, matching the prior-year result. The segment benefited from $10.4 million in favorable reserve development, including $4 million related to prior-year storms.

Chief Operating Officer Jen Klobnak said marine was a highlight, with premiums rising 11% despite essentially flat rate changes. She said double-digit growth in submissions gave the company opportunities to remain selective.

In E&S property, however, premiums fell 17% as additional capacity entered the market and standard carriers and retailers reclaimed business that had previously moved through wholesalers. Klobnak said renewal pricing declined by double digits for accounts reaching their second renewal in the softening cycle, while retention remained modestly below historical levels.

RLI is willing to let business leave when pricing fails to meet return targets, she said, though the company continues to bind business at rates it considers adequate. During the question-and-answer session, Klobnak said the market was softening but remained attractive, with rates around 2022 levels and opportunities still available for underwriting at acceptable terms.

Hawaii homeowners premiums increased 9%, driven by a 13% rate increase. Storm activity was elevated, but its financial impact on RLI was immaterial, according to Klobnak.

RLI’s partnership with landlord-insurance specialist Steadily generated $9 million of premium during the quarter. Klobnak described Steadily as operating similarly to an RLI branch office, with RLI maintaining involvement in coverage, claims oversight, reporting and underwriting. She said the company does not have a production target for the relationship and is focused instead on expected loss performance. Commissions are somewhat higher on that book, she added, with a profit commission component tied to results.

Casualty growth led by personal umbrella

Casualty premiums rose 4%, while the segment recorded a 99.6% combined ratio, compared with 98.2% a year earlier. The segment benefited from $8.2 million in favorable reserve development, including contributions from excess casualty and commercial transportation.

Personal umbrella premiums increased 22%, with rates up 8%. Klobnak said the pace of rate increases moderated as previously approved changes earned through the book, but the next approved filing takes effect Jan. 1 and is expected to return rate increases to double-digit levels during 2027.

She said cumulative rates in personal umbrella have increased roughly 50% over the past three years, alongside efforts to improve the book’s geographic mix and driver characteristics. RLI has seen positive signs in current and 2025 accident-year results, but is maintaining its loss-ratio assumptions until it has a longer period to evaluate the impact.

E&S casualty premiums declined 10% amid greater competition, particularly in the Northeast, from MGAs and standard carriers. Klobnak said submissions increased by double digits and the company saw higher excess-liability bind activity near quarter-end, though she said it was too early to determine whether that represented a broader trend.

Commercial transportation premiums fell 9%, despite a 12% increase in rates. RLI non-renewed selected accounts that did not meet profit expectations or loss-control recommendations, while increased competition and re-emerging MGAs contributed to a nearly 10-point decline in renewal retention.

Surety remains profitable amid competition

Surety premiums increased about 1%, and the segment’s combined ratio improved to 79.8% from 85% a year earlier. Favorable prior-year reserve development totaled $4.3 million, while underwriting income rose to $7.3 million from $5.6 million.

Klobnak said competition has increased, especially among small and middle-market accounts, with some competitors reducing underwriting requirements. Construction activity in government and renewable-energy projects has slowed, while transactional surety benefited from public official bond opportunities during the election year.

Management said it remains focused on producer relationships and underwriting discipline rather than pursuing premium growth for its own sake. Through the first nine months of 2026, RLI generated $176 million in underwriting income on an 85.9% combined ratio and operating earnings of $2.52 per share.

About RLI (NYSE:RLI)

RLI Corp. NYSE: RLI is a specialty insurance company that underwrites property and casualty insurance products for commercial and personal customers. The company focuses on specialized risks that may not be adequately served by standard insurance carriers.

RLI's offerings include commercial property and casualty coverage, professional liability insurance, surety bonds, transportation-related insurance, and personal lines such as homeowners and personal umbrella coverage. Its products are distributed through independent agents, brokers, and other insurance intermediaries.

Founded in 1965 and headquartered in Peoria, Illinois, RLI serves customers primarily throughout the United States.

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