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Oct 3, 2025 4:07 PM Eastern Daylight Time RLI Corp. (NYSE: RLI) is a specialty insurer serving niche property, casualty and surety markets. The company provides deep underwriting expertise and superior service to commercial and personal lines customers nationwide. RLI's products are offered through its insurance subsidiaries RLI Insurance Company, Mt. Hawley Insurance Company and Contractors Bonding and Insurance Company. All of RLI's subsidiaries are rated A+ "Superior†by AM Best Company. RLI has paid and ...

Group 1 - RLI Corp. has experienced weak price performance, which is unusual for this specialty insurance company [2] - The pressures on RLI Corp.'s stock are attributed to various factors affecting its performance [2] - The Value Lab offers a portfolio with real-time updates and regular global market news reports, focusing on long-only value ideas [1][2] Group 2 - The Valkyrie Trading Society consists of analysts sharing high conviction ideas that are expected to generate non-correlated and outsized returns [3] - The society operates as long-only investors, focusing on developed market opportunities [3]

Core Insights - RLI Corp. (RLI) shares are trading at a premium compared to the Zacks Property and Casualty Insurance industry, with a price-to-book value of 3.42X, exceeding the industry average of 1.54X, the Finance sector's 4.37X, and the Zacks S&P 500 Composite's 8.74X [1] - RLI shares have experienced a decline of 13.2% over the past year, contrasting with the industry's return of 6.1% [2] - RLI has a market capitalization of $5.93 billion, with an average trading volume of 0.6 million shares over the last three months [3] Growth Projections - The Zacks Consensus Estimate for RLI's 2025 earnings per share indicates a year-over-year increase of 7.3% [4] - The consensus estimate for revenues in 2025 is projected at $1.77 billion, reflecting a year-over-year improvement of 6.3% [4] - For 2026, the revenue estimate indicates a further increase of 3.4% from the 2025 estimates [4] Financial Performance - RLI's return on equity (ROE) has improved, with a trailing 12 months ROE of 15.8%, significantly higher than the industry average of 7.7% [5] - RLI has maintained a strong track record of underwriting profitability for 29 consecutive years, showcasing its operational strength [9][12] Strategic Factors - RLI is growing through product diversification, focusing on new product introductions, re-underwriting, and business expansion, which positions the company well for improved revenue generation [6] - The company has a conservative underwriting and reserving policy, allowing for favorable reserve releases despite incurring catastrophe losses [6] - RLI has a robust dividend history, having raised regular dividends for 50 years and paid special dividends since 2011, making it attractive for yield-seeking investors [10][12] Balance Sheet and Capital Structure - RLI is strengthening its balance sheet by improving liquidity and leverage, which supports its operations and long-term book value growth [11] - The company’s sound capital structure enhances its ability to meet policyholder interests and drive operational efficiency [11]

Core Insights - RLI Corp. shares have decreased by 9.6% over the past year, underperforming compared to the Finance sector and the S&P 500, which returned 16% and 14.3% respectively [1] - The stock is currently trading at $68.40, approximately 25% below its 52-week high of $91.14, and below both the 50-day and 200-day simple moving averages [1] Valuation - RLI's forward 12-month price-to-book ratio stands at 3.62X, significantly higher than the industry average of 1.53X [2] Growth Projections - The Zacks Consensus Estimate projects a 7.3% year-over-year increase in RLI's earnings per share for 2025, with revenues expected to reach $1.77 billion, reflecting a 6.3% improvement [3] - For 2026, revenue estimates indicate a further increase of 3.4% compared to 2025 [3] Return on Capital - RLI's return on equity (ROE) has improved to 15.8%, well above the industry average of 7.6%, indicating effective utilization of shareholders' funds [4] Price Target and Upside Potential - The average price target for RLI, based on short-term estimates from three analysts, is $74 per share, suggesting an 8.9% upside from the last closing price [5] Business Strengths - RLI has maintained 29 consecutive years of underwriting profitability, showcasing its operational strength [7][10] - The company has a strong dividend history, having raised regular dividends for 50 years and paid special dividends since 2011, making it appealing to yield-seeking investors [11] Strategic Initiatives - RLI is focused on product diversification, introducing new products, and expanding distribution, which positions the company for improved top-line growth [9] - A conservative underwriting and reserving policy allows RLI to achieve favorable reserve releases despite incurring catastrophe losses [10] Financial Health - RLI is enhancing its balance sheet by improving liquidity and leverage, which supports its long-term operational capabilities and book value growth [12] Conclusion - RLI is recognized as one of the most profitable property and casualty writers in the industry, with a strong local branch network and a focus on specialty insurance lines contributing to its profitability [13]

PART I - FINANCIAL INFORMATION This section presents RLI Corp.'s unaudited condensed consolidated financial statements and management's analysis for the periods ended June 30, 2025 and 2024 [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents RLI Corp.'s unaudited condensed consolidated financial statements and detailed notes for Q2 2025 and 2024 [Condensed Consolidated Statements of Earnings and Comprehensive Earnings](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Earnings%20and%20Comprehensive%20Earnings) Net and comprehensive earnings significantly increased for Q2 2025, driven by higher premiums, investment income, and unrealized gains Consolidated Statements of Earnings (in thousands) | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :-------------------------------- | :------ | :------ | :------ | :------ | | Net premiums earned | $401,904 | $379,065 | $800,249 | $739,741 | | Net investment income | $39,418 | $33,961 | $76,144 | $66,808 | | Net realized gains (losses) | $15,004 | $(192) | $29,916 | $5,802 | | Net unrealized gains on equity securities | $43,500 | $3,608 | $1,182 | $48,922 | | **Consolidated revenue** | **$499,826** | **$416,442** | **$907,491** | **$861,273** | | Losses and settlement expenses | $184,578 | $167,799 | $361,816 | $311,623 | | Policy acquisition costs | $125,502 | $113,921 | $249,189 | $224,375 | | Insurance operating expenses | $29,594 | $27,321 | $56,468 | $56,024 | | Total expenses | $345,778 | $314,785 | $677,860 | $604,394 | | Earnings before income taxes | $156,515 | $103,303 | $235,146 | $263,294 | | **Net earnings** | **$124,336** | **$81,992** | **$187,550** | **$209,892** | | Other comprehensive earnings (loss), net of tax | $18,701 | $(7,843) | $48,731 | $(20,514) | | **Comprehensive earnings** | **$143,037** | **$74,149** | **$236,281** | **$189,378** | | Basic net earnings per share | $1.35 | $0.90 | $2.04 | $2.30 | | Diluted net earnings per share | $1.34 | $0.89 | $2.03 | $2.27 | - Net earnings for Q2 2025 increased by **51.6% to $124.3 million** from **$82.0 million** in Q2 2024. For the six months ended June 30, 2025, net earnings decreased by **10.6% to $187.6 million** from **$209.9 million** in the prior year[10](index=10&type=chunk) - Comprehensive earnings for Q2 2025 increased by **93% to $143.0 million** from **$74.1 million** in Q2 2024. For the six months ended June 30, 2025, comprehensive earnings increased by **24.7% to $236.3 million** from **$189.4 million** in the prior year[10](index=10&type=chunk) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets and shareholders' equity increased as of June 30, 2025, driven by investments, cash, and retained earnings Consolidated Balance Sheet (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :---------------- | | **ASSETS** | | | | Total investments and cash | $4,426,062 | $4,084,631 | | Premiums and reinsurance balances receivable, net | $252,931 | $230,534 | | Reinsurance balances recoverable on unpaid losses and settlement expenses, net | $761,719 | $755,425 | | Deferred policy acquisition costs | $180,765 | $166,214 | | **TOTAL ASSETS** | **$5,990,807** | **$5,628,802** | | **LIABILITIES** | | | | Unpaid losses and settlement expenses | $2,806,889 | $2,693,470 | | Unearned premiums | $1,034,176 | $984,140 | | Total Liabilities | $4,256,146 | $4,106,835 | | **SHAREHOLDERS' EQUITY** | | | | Retained earnings | $1,878,736 | $1,719,668 | | Accumulated other comprehensive earnings (loss) | $(124,992) | $(173,723) | | **TOTAL SHAREHOLDERS' EQUITY** | **$1,734,661** | **$1,521,967** | | **TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY** | **$5,990,807** | **$5,628,802** | - Total assets increased by **6.4% to $5.99 billion** at June 30, 2025, from **$5.63 billion** at December 31, 2024[13](index=13&type=chunk) - Total shareholders' equity increased by **14.0% to $1.73 billion** at June 30, 2025, from **$1.52 billion** at December 31, 2024, driven by an increase in retained earnings and a reduction in accumulated other comprehensive loss[13](index=13&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) Total shareholders' equity increased from January 1 to June 30, 2025, due to net and comprehensive earnings, offset by dividends Changes in Shareholders' Equity (in thousands) | Metric | Balance, Jan 1, 2025 | Net Earnings | Other Comprehensive Earnings (Loss), net of tax | Dividends and Dividend Equivalents | Balance, June 30, 2025 | | :-------------------------------- | :------------------- | :----------- | :-------------------------------------- | :--------------------------------- | :------------------- | | Total Shareholders' Equity | $1,521,967 | $187,550 | $48,731 | $(28,482) | $1,734,661 | | Retained Earnings | $1,719,668 | $187,550 | — | $(28,482) | $1,878,736 | | Accumulated Other Comprehensive Earnings (Loss) | $(173,723) | — | $48,731 | — | $(124,992) | - Total shareholders' equity increased by **$212.7 million** from January 1, 2025, to June 30, 2025, primarily due to **$187.6 million** in net earnings and **$48.7 million** in other comprehensive earnings, partially offset by **$28.5 million** in dividends[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flows increased for 6M 2025, but significant investing and financing activities led to a net decrease in cash Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | 6M 2025 | 6M 2024 | | :-------------------------------- | :------ | :------ | | Net cash provided by operating activities | $278,233 | $212,771 | | Net cash used in investing activities | $(269,082) | $(177,009) | | Net cash used in financing activities | $(27,527) | $(22,156) | | Net increase (decrease) in cash | $(18,376) | $13,606 | | Cash at the beginning of the period | $39,790 | $36,424 | | Cash at June 30, | $21,414 | $50,030 | - Net cash provided by operating activities increased by **30.8% to $278.2 million** in 6M 2025, up from **$212.8 million** in 6M 2024[18](index=18&type=chunk) - Net cash used in investing activities increased by **52.0% to $269.1 million** in 6M 2025, from **$177.0 million** in 6M 2024, primarily due to higher purchases of fixed income and equity securities[18](index=18&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, investments, loss development, income taxes, stock compensation, segments, and leases [1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=9&type=section&id=1.%20BASIS%20OF%20PRESENTATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section outlines financial statement presentation, accounting policies, stock split adjustments, new standards, and impairment - RLI Corp. effected a two-for-one stock split on January 15, 2025, with all share and per share information retroactively adjusted[22](index=22&type=chunk) - No new accounting standards applicable in 2025 materially impact the financial statements. Prospective standards (ASU 2023-09 and ASU 2024-03) are disclosure-related and not expected to have a material financial impact[23](index=23&type=chunk)[24](index=24&type=chunk)[26](index=26&type=chunk) - Annual impairment assessments for goodwill and indefinite-lived intangible assets were performed in Q2 2025, with no impairment found[32](index=32&type=chunk) [2. INVESTMENTS](index=16&type=section&id=2.%20INVESTMENTS) This section details the investment portfolio, including fixed income, equity, realized gains/losses, fair value, and credit loss analysis Net Realized Gain (Loss) on Disposition of Investments (in thousands) | Security Type | 6M 2025 Net Realized Gain (Loss) | 6M 2024 Net Realized Gain (Loss) | | :-------------------------------- | :------------------------------- | :------------------------------- | | Fixed income securities - available-for-sale | $(812) | $(782) | | Equity securities | $29,472 | $13,004 | | Fixed income securities - calls/maturities | $(10) | $(777) | Fair Value of Investments (in thousands) | Asset Type | June 30, 2025 (Total) | December 31, 2024 (Total) | | :-------------------------------- | :-------------------- | :---------------------- | | Fixed income securities - available-for-sale | $3,420,761 | $3,175,796 | | Equity securities | $810,959 | $736,191 | | Total | $4,231,720 | $3,911,987 | - As of June 30, 2025, the fixed income portfolio contained 1,133 securities with an unrealized loss position totaling **$177 million**, representing **5%** of the portfolio's cost basis. Unrealized losses decreased in the first six months of 2025 due to falling interest rates[59](index=59&type=chunk) [3. HISTORICAL LOSS AND LAE DEVELOPMENT](index=25&type=section&id=3.%20HISTORICAL%20LOSS%20AND%20LAE%20DEVELOPMENT) This section reconciles unpaid losses and LAE, showing favorable development on prior years' loss reserves for 6M 2025 and 2024 Unpaid Losses and LAE Reconciliation (in thousands) | Metric | 6M 2025 | 6M 2024 | | :-------------------------------- | :------ | :------ | | Net unpaid losses and LAE at beginning of year | $1,938,045 | $1,688,676 | | Increase (decrease) in incurred losses and LAE - Current accident year | $420,433 | $376,546 | | Increase (decrease) in incurred losses and LAE - Prior accident years | $(58,617) | $(64,923) | | Total incurred | $361,816 | $311,623 | | Total paid | $(254,691) | $(237,965) | | Net unpaid losses and LAE at June 30, | $2,045,170 | $1,762,334 | - Incurred losses and LAE for 6M 2025 included **$59 million** of favorable development on prior years' loss reserves, mainly from accident years 2019-2022 and 2024, driven by marine, commercial excess, surety, and general liability[71](index=71&type=chunk) - For 6M 2024, favorable development on prior years' loss reserves was **$65 million**, primarily from accident years 2016, 2017, 2019, 2020, 2022, and 2023, with marine, surety, and general liability as key drivers[72](index=72&type=chunk) [4. INCOME TAXES](index=25&type=section&id=4.%20INCOME%20TAXES) This section details effective tax rates for Q2 and 6M 2025 and 2024, noting the non-material impact of the OBBBA Effective Tax Rates | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Three months ended June 30, | 20.6% | 20.6% | | Six months ended June 30, | 20.2% | 20.3% | - The One Big Beautiful Bill Act (OBBBA), signed on July 4, 2025, is not expected to have a material impact on the company's financial statements, despite implications for depreciation and other cost deductions[76](index=76&type=chunk) [5. STOCK BASED COMPENSATION](index=26&type=section&id=5.%20STOCK%20BASED%20COMPENSATION) This section describes equity compensation plans, including the 2023 LTIP, detailing expense, tax benefits, and RSU/stock option activity - The 2023 RLI Corp. Long-Term Incentive Plan (LTIP) replaced the 2015 LTIP, with **1,083,188 awards** granted under the 2023 LTIP since its approval, including **270,006** in 2025[78](index=78&type=chunk) Stock-Based Compensation Expense (in thousands) | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Three months ended June 30, | $2,000 | $4,000 | | Six months ended June 30, | $4,000 | $4,000 | | Total unrecognized compensation expense | $9,000 | N/A | | Weighted average vesting period | 2.57 years | N/A | - The intrinsic value of stock options exercised was **$3 million** for the first six months of 2025, compared to **$9 million** for the same period in 2024[83](index=83&type=chunk) [6. OPERATING SEGMENT INFORMATION](index=30&type=section&id=6.%20OPERATING%20SEGMENT%20INFORMATION) This section presents operating results for Casualty, Property, and Surety segments, assessing performance via underwriting income and combined ratio Net Premiums Earned by Segment (in thousands) | Segment | 6M 2025 | 6M 2024 | YoY Change | | :-------------------------------- | :------ | :------ | :--------- | | Casualty | $463,686 | $407,376 | +13.8% | | Property | $263,208 | $263,508 | -0.1% | | Surety | $73,355 | $68,857 | +6.5% | | **Grand Total** | **$800,249** | **$739,741** | **+8.2%** | Segment Earnings Before Income Taxes (Underwriting Income) (in thousands) | Segment | 6M 2025 | 6M 2024 | YoY Change | | :-------------------------------- | :------ | :------ | :--------- | | Casualty | $10,360 | $23,989 | -56.8% | | Property | $106,426 | $110,896 | -4.1% | | Surety | $15,990 | $12,834 | +24.6% | | **Total Segment Earnings** | **$132,776** | **$147,719** | **-10.2%** | Segment Combined Ratio | Segment | 6M 2025 | 6M 2024 | | :-------------------------------- | :------ | :------ | | Casualty | 97.8 | 94.1 | | Property | 59.6 | 57.9 | | Surety | 78.2 | 81.4 | | **Total** | **83.4** | **80.0** | [7. LEASES](index=33&type=section&id=7.%20LEASES) This section details operating lease obligations, including ROU assets, liabilities, costs, cash flows, and future minimum payments Lease Costs (in thousands) | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :-------------------------------- | :------ | :------ | :------ | :------ | | Operating lease cost | $1,081 | $1,153 | $2,230 | $2,334 | | Variable lease cost | $459 | $260 | $787 | $508 | | Sublease income | $(42) | $(42) | $(85) | $(85) | | **Total lease cost** | **$1,498** | **$1,371** | **$2,932** | **$2,757** | | Operating cash outflows from operating leases | $1,017 | $1,105 | $2,245 | $2,168 | | ROU assets obtained in exchange for new operating lease liabilities | $467 | $333 | $480 | $3,789 | - As of June 30, 2025, operating lease ROU assets were **$12.5 million** and operating lease liabilities were **$14.2 million**, with a weighted-average remaining lease term of **5.89 years**[100](index=100&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses RLI Corp.'s financial performance, condition, and outlook, covering business overview, key measures, results, and liquidity [OVERVIEW](index=34&type=section&id=OVERVIEW) RLI Corp. is a specialty insurer focused on niche markets, emphasizing underwriting profitability and shareholder returns - RLI Corp. achieved its **29th consecutive year of underwriting profitability** in 2024, with an average combined ratio of **88.1%** over that period[104](index=104&type=chunk) - The company's business model focuses on underwriting profitability, sound risk selection, and discipline, with a secondary focus on premium growth where underwriting profit exists[110](index=110&type=chunk) - The company's three distinct business segments are Property, Casualty, and Surety, with growth measured by gross premiums written and profitability by underwriting income and combined ratios[105](index=105&type=chunk) [Key Performance Measures](index=36&type=section&id=Key%20Performance%20Measures) This section defines key performance measures like underwriting income and combined ratio, noting no significant changes to critical accounting policies - Underwriting income is a pretax measure of insurance operations profitability, calculated by subtracting losses and settlement expenses, policy acquisition costs, and insurance operating expenses from net premiums earned[113](index=113&type=chunk) - The combined ratio, a common industry measure, is the sum of the loss ratio (losses and settlement expenses divided by net premiums earned) and the expense ratio (policy acquisition costs and insurance operating expenses divided by net premiums earned)[115](index=115&type=chunk) - No significant changes to critical accounting policies, including those for loss reserves, investment valuation, reinsurance recoverability, deferred policy acquisition costs, and deferred taxes, were reported during the year[117](index=117&type=chunk)[118](index=118&type=chunk) [RESULTS OF OPERATIONS](index=38&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes RLI Corp.'s financial results for Q2 and 6M 2025 vs. 2024, covering premiums, investment income, gains, underwriting income, combined ratio, and net earnings [Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024](index=38&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202024) For 6M 2025, net premiums and investment income increased, but underwriting income and net earnings decreased, while comprehensive earnings rose Consolidated Revenues (in thousands) | Metric | 6M 2025 | 6M 2024 | YoY Change | | :-------------------------------- | :------ | :------ | :--------- | | Net premiums earned | $800,249 | $739,741 | +8.2% | | Net investment income | $76,144 | $66,808 | +13.9% | | Net realized gains (losses) | $29,916 | $5,802 | +415.6% | | Net unrealized gains on equity securities | $1,182 | $48,922 | -97.6% | | **Total consolidated revenue** | **$907,491** | **$861,273** | **+5.4%** | - Underwriting income for 6M 2025 was **$133 million** (**83.4 combined ratio**), down from **$148 million** (**80.0 combined ratio**) in 6M 2024. This was due to lower favorable development on prior years' loss reserves (**$59 million** in 2025 vs. **$65 million** in 2024) and a shift towards casualty lines[121](index=121&type=chunk)[122](index=122&type=chunk) - Net earnings for 6M 2025 decreased to **$188 million** from **$210 million** in 6M 2024, while comprehensive earnings increased to **$236 million** from **$189 million**, driven by **$49 million** in other comprehensive earnings from lower interest rates increasing fixed income fair values[125](index=125&type=chunk)[126](index=126&type=chunk) [Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024](index=44&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202024) For Q2 2025, net premiums and investment income increased, but underwriting income decreased due to mix shift and expenses, while net and comprehensive earnings rose Consolidated Revenues (in thousands) | Metric | Q2 2025 | Q2 2024 | YoY Change | | :-------------------------------- | :------ | :------ | :--------- | | Net premiums earned | $401,904 | $379,065 | +6.0% | | Net investment income | $39,418 | $33,961 | +16.1% | | Net realized gains (losses) | $15,004 | $(192) | N/A | | Net unrealized gains on equity securities | $43,500 | $3,608 | +1105.8% | | **Total consolidated revenue** | **$499,826** | **$416,442** | **+20.0%** | - Underwriting income for Q2 2025 was **$62 million** (**84.5 combined ratio**), down from **$70 million** (**81.5 combined ratio**) in Q2 2024. The loss ratio increased to **45.9%** from **44.3%** due to a shift towards casualty lines, and the expense ratio increased to **38.6%** from **37.2%** due to higher bonus accruals and investments[147](index=147&type=chunk)[148](index=148&type=chunk) - Net earnings for Q2 2025 increased to **$124 million** from **$82 million** in Q2 2024. Comprehensive earnings totaled **$143 million**, up from **$74 million**, driven by **$44 million** in unrealized gains on equity securities and **$19 million** in other comprehensive earnings from fixed income[150](index=150&type=chunk)[151](index=151&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=50&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses RLI Corp.'s cash flows, debt, liquidity, investment portfolio, capital structure, and dividend policy for 6M 2025 Cash Flows Summary (in thousands) | Activity | 6M 2025 | 6M 2024 | | :-------------------------------- | :------ | :------ | | Operating cash flows | $278,233 | $212,771 | | Investing cash flows | $(269,082) | $(177,009) | | Financing cash flows | $(27,527) | $(22,156) | | **Total net increase (decrease) in cash** | **$(18,376)** | **$13,606** | - As of June 30, 2025, the company had **$100 million** in debt outstanding, including **$50 million** from a revolving line of credit with PNC Bank and **$50 million** from the Federal Home Loan Bank of Chicago (FHLBC)[170](index=170&type=chunk) - The investment portfolio increased by **$341 million** from December 31, 2024, to June 30, 2025, with fixed income comprising **77.3%** and equity securities **18.3%** of total fair value. The fixed income portfolio had an average duration of **4.9 years**[143](index=143&type=chunk)[175](index=175&type=chunk) - RLI Ins. paid **$110 million** in ordinary dividends to RLI Corp. in the first six months of 2025. As of June 30, 2025, **$13 million** of the principal insurance subsidiary's net assets were unrestricted for ordinary dividend distribution[189](index=189&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=56&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) No material changes to market risk exposure since 2024 Form 10-K, with primary risks remaining equity price and interest rate risk - No material changes to market risk exposure were reported since the 2024 Annual Report on Form 10-K[190](index=190&type=chunk) - Primary market risks include equity price risk from equity securities and interest rate risk from fixed income securities, with a consistent focus on high credit quality, investment grade securities[191](index=191&type=chunk) [Item 4. Controls and Procedures](index=56&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025[192](index=192&type=chunk) - No material changes were made to internal control over financial reporting during the last fiscal quarter[194](index=194&type=chunk) PART II - OTHER INFORMATION This section provides other information, including legal proceedings, risk factors, equity sales, defaults, trading plans, and exhibits [Item 1. Legal Proceedings](index=57&type=section&id=Item%201.%20Legal%20Proceedings) No material changes to legal proceedings were reported during the period - No material changes to legal proceedings were reported[197](index=197&type=chunk) [Item 1A. Risk Factors](index=57&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors were reported during the period - No material changes to risk factors were reported[198](index=198&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=57&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable for the reporting period - This item is not applicable for the reporting period[199](index=199&type=chunk) [Item 3. Defaults upon Senior Securities](index=57&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) This item is not applicable for the reporting period - This item is not applicable for the reporting period[200](index=200&type=chunk) [Item 4. Mine Safety Disclosures](index=57&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable for the reporting period - This item is not applicable for the reporting period[201](index=201&type=chunk) [Item 5. Other Information](index=57&type=section&id=Item%205.%20Other%20Information) This section provides information on securities trading plans for executive officers and directors, with no new plans adopted or terminated - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[203](index=203&type=chunk) [Securities Trading Plans of Executive Officers and Directors](index=57&type=section&id=Securities%20Trading%20Plans%20of%20Executive%20Officers%20and%20Directors) The Insider Trading Policy permits Rule 10b5-1 trading plans, but no new plans were adopted or terminated by directors or officers - The company's Insider Trading Policy allows executive officers and directors to enter into Rule 10b5-1 trading plans[202](index=202&type=chunk) - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the three months ended June 30, 2025[203](index=203&type=chunk) [Item 6. Exhibits](index=58&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including stock option, RSU agreements, and SOX certifications - Exhibits include 2025 Stock Option Agreement, 2025 Non-Employee Director Restricted Stock Unit Agreement, and Certifications Pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[205](index=205&type=chunk) SIGNATURES This section contains the required signatures for the Form 10-Q, confirming authorization and signing by RLI Corp.'s CFO - The report was signed by Todd W. Bryant, Chief Financial Officer (Principal Financial and Chief Accounting Officer) on July 24, 2025[209](index=209&type=chunk)

Core Insights - RLI Corp. reported second-quarter 2025 operating earnings of 84 cents per share, exceeding the Zacks Consensus Estimate by 12%, although this represents a 2.3% decrease from the prior-year quarter [1] Operational Performance - Operating revenues for the quarter were $441 million, reflecting a 6.9% year-over-year increase, driven by a 6% rise in net premiums earned and a 16% increase in net investment income, though it missed the Zacks Consensus Estimate by 0.5% [2] - Gross premiums written remained flat at $562.3 million, with performance improvements in the Casualty and Property segments offset by a decline in the Surety segment [2] - Net investment income rose 16% year over year to $39.4 million, aligning with estimates, while total expenses increased by 9.8% to $345.8 million due to higher loss and settlement expenses [3] Financial Update - Underwriting income decreased by 11.14% year over year to $62.2 million, with the combined ratio deteriorating by 300 basis points to 84.5, better than the Zacks Consensus Estimate of 88 [4] - RLI exited the quarter with total investments and cash of $4.4 billion, an 8.4% increase from the end of 2024, and book value rose 13.9% to $18.89 per share [4] - Net cash flow from operations increased by 23.2% year over year to $174.7 million [4] - The statutory surplus increased by 2.3% to $1.8 billion as of June 30, 2025, while return on equity was 23.5%, down 180 basis points from the previous year [5] Dividend Update - On June 20, 2025, RLI paid a dividend of 16 cents, an increase of 1 cent from the previous payout, with cumulative dividends exceeding $971 million over the last five years [6] Peer Performances - The Travelers Companies reported second-quarter 2025 core income of $6.51 per share, beating estimates by 83.8%, with total revenues increasing by 6.7% to $12.1 billion [9] - The Progressive Corporation's earnings per share of $4.88 exceeded estimates by 10.1%, with operating revenues rising 19.5% to $42.2 billion [10] - W.R. Berkley's operating income of $1.05 per share beat estimates, with operating revenues at $3.6 billion, up 7.9% year over year [11]

Financial Data and Key Metrics Changes - The company reported second quarter operating earnings of $0.84 per share, supported by solid underwriting performance and a 16% increase in investment income [9] - The total combined ratio was 84.5, up from 81.5 last year, reflecting modest increases in the underlying loss and expense ratios [9] - Year-to-date book value per share has grown 16% inclusive of dividends [6][14] Business Line Data and Key Metrics Changes - The property segment experienced a 10% decline in gross premiums, influenced by rate decreases in E and S property, while Marine and Hawaii homeowners products continued to deliver growth [10][17] - The casualty insurance segment posted a 7% increase in gross premiums with a combined ratio of 96.5 for Q2 [11][18] - Surety's gross premium was up 7% over last year, with all sub-segments experiencing growth [11] Market Data and Key Metrics Changes - The commercial property market showed significant softening, impacting top-line growth which remained flat [6] - Competition has increased in the E and S property space, with about 20 new entrants in the last two years [31] - The company noted a 12% rate increase in the transportation division, despite a highly competitive environment [22][41] Company Strategy and Development Direction - The company focuses on profitability and long-term value creation over short-term results, adjusting strategies based on market conditions [6][7] - Emphasis on selection and discipline in underwriting, particularly in the property segment where the risk-reward profile is being carefully evaluated [7][15] - The company is investing in technology and digital tools to enhance customer service and improve underwriting processes [28][51] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating current market challenges while identifying attractive opportunities across the portfolio [6][24] - The company remains cautious about loss trends and continues to be selective in underwriting, particularly in the auto coverage space [22][68] - Management noted that recent tort reforms in certain states may positively impact underwriting confidence and business opportunities [56] Other Important Information - The company reported a total return of 2.9% for the quarter, benefiting from market recovery in May and June [13] - Operating cash flow for Q2 totaled $175 million, up $33 million from last year, providing a solid foundation for continued portfolio activity [12] Q&A Session Summary Question: Can you provide insight on acquisition costs in property and casualty? - Management noted pressure on commission costs in property and surety, with a mix shift observed [26][27] Question: Where is the pricing pressure coming from in casualty? - Management indicated increased competition in the E and S property space, with many new entrants affecting rates [30][31] Question: What is the outlook for loss cost trends in transportation? - Management expects double-digit loss cost inflation in commercial vehicles, necessitating continued rate increases [41] Question: Can you elaborate on the mix shift within surety? - Management explained that the mix has shifted towards more commercial surety and away from energy-related business [48][51] Question: Are there any early benefits from tort reform? - Management indicated that while it's early, there are signs of improved underwriting confidence in states with recent tort reforms [55][56] Question: What is the current state of the construction market? - Management reported a healthy construction market with increased submissions and positive trends in both surety and casualty segments [62][66]

Financial Data and Key Metrics Changes - The company reported second quarter operating earnings of $0.84 per share, supported by solid underwriting performance and a 16% increase in investment income [8][9] - The total combined ratio was 84.5, up from 81.5 last year, reflecting modest increases in the underlying loss and expense ratios [9][10] - Year-to-date book value per share increased by 16% inclusive of dividends [6][15] Business Line Data and Key Metrics Changes - The property segment experienced a 10% decline in gross premiums, influenced by rate decreases in E and S property, while Marine and Hawaii homeowners products continued to deliver growth [10][18] - The casualty insurance segment posted a 7% increase in gross premiums with a combined ratio of 96.5, benefiting from favorable prior year's reserve development [12][19] - Surety's gross premium was up 7% over last year, with all sub-segments experiencing growth [12][19] Market Data and Key Metrics Changes - The commercial property market showed significant softening, impacting top line growth which remained flat [6][9] - Competition increased in the E and S property space, with about 20 new entrants over the last two years, leading to rate pressure [30] - The transportation division saw a 12% increase in rates, although competition remains high [21][40] Company Strategy and Development Direction - The company focuses on discipline, continuous improvement, and sustainability, prioritizing profitability and long-term value creation over short-term results [6][7] - The strategy includes being selective in underwriting and adjusting to market conditions, particularly in property where the risk-reward profile is unfavorable [7][16] - The company emphasizes a strong community and collaboration among teams to support customers and enhance service delivery [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating challenges and highlighted attractive opportunities across most of the portfolio despite market headwinds [7][24] - The company remains cautious about loss trends and continues to be selective in underwriting, particularly in the auto coverage space [22][68] - Management noted that recent tort reforms in certain states could positively impact underwriting confidence and business opportunities [56] Other Important Information - The company reported a positive total return of 2.9% for the quarter, benefiting from market recovery in May and June [14] - Operating cash flow for Q2 totaled $175 million, up $33 million from last year, providing a solid foundation for continued portfolio activity [13] Q&A Session Summary Question: Can you provide insight on acquisition costs in property and casualty? - Management noted pressure on commission costs in property and surety, with investments in technology and customer relationship management contributing to higher expenses [26][28] Question: Where is the pricing pressure coming from in casualty? - Management indicated increased competition in the E and S property space, with many new entrants affecting rates, while casualty rates remain stable due to tailored coverage [30][31] Question: What is the outlook for the construction market? - Management reported a healthy construction industry with double-digit increases in submissions, indicating positive trends in both surety and casualty segments [65] Question: How is the company addressing loss cost trends in transportation? - Management acknowledged significant double-digit inflation in commercial vehicles and emphasized the importance of rate increases and risk selection to maintain profitability [40][41] Question: Are there any early benefits from tort reform? - Management indicated that while it is early to assess the full impact, there are signs of increased confidence in underwriting in states with recent tort reforms [56]

Core Insights - RLI Corp. reported revenue of $441.32 million for the quarter ended June 2025, marking a year-over-year increase of 6.9% and an EPS of $0.84, slightly down from $0.86 a year ago [1] - The revenue fell short of the Zacks Consensus Estimate of $443.64 million by 0.52%, while the EPS exceeded the consensus estimate of $0.75 by 12% [1] Financial Performance Metrics - RLI Corp.'s shares have returned -2.7% over the past month, contrasting with the Zacks S&P 500 composite's +5.4% change, and the stock currently holds a Zacks Rank 4 (Sell) [3] - Net loss & settlement expenses were reported at 45.9%, better than the five-analyst average estimate of 49.9% [4] - Net operating expenses totaled 38.6%, slightly above the 37.8% average estimate based on five analysts [4] - Underwriting income (loss) was reported at 84.5%, below the five-analyst average estimate of 87.7% [4] - Net premiums earned were $401.9 million, compared to the estimated $404.7 million, reflecting a 6% increase year-over-year [4] - Net investment income increased by 16.1% year-over-year to $39.42 million, surpassing the average estimate of $38.94 million [4] - Net premiums earned in the Property segment were $130.66 million, below the estimated $138.3 million, representing a -2.6% change year-over-year [4] - Net premiums earned in the Surety segment were $36.6 million, slightly below the average estimate of $38.1 million, with a year-over-year change of +2.1% [4] - Net premiums earned in the Casualty segment were $234.64 million, exceeding the average estimate of $227.11 million, with a year-over-year change of +12.2% [4]