RLI(RLI) - 2025 Q3 - Quarterly Report

Company Information This section details RLI Corp.'s corporate structure, stock information, and regulatory filing status Registrant Details RLI Corp. is a Delaware-incorporated company, with common stock (RLI) listed on the NYSE - RLI Corp. is a Delaware-incorporated company, trading on the New York Stock Exchange under the symbol RLI[2][3] Common Stock Outstanding (as of Oct 14, 2025) | Metric | Value | | :--- | :--- | | Common Stock Outstanding (as of Oct 14, 2025) | 91,837,835 shares | - The registrant is a large accelerated filer and is not a shell company[3][4] Part I - Financial Information This part presents RLI Corp.'s unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Financial Statements This section presents RLI Corp.'s unaudited condensed consolidated financial statements and detailed notes Condensed Consolidated Statements of Earnings and Comprehensive Earnings This statement provides RLI Corp.'s financial performance, including revenues, net earnings, and comprehensive earnings Consolidated Revenue (in thousands) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net premiums earned | $407,695 | $389,489 | $1,207,944 | $1,129,230 | | Net investment income | $41,270 | $36,694 | $117,414 | $103,502 | | Net realized gains | $18,318 | $5,420 | $48,234 | $11,222 | | Net unrealized gains on equity securities | $41,981 | $38,392 | $43,163 | $87,314 | | Consolidated revenue | $509,264 | $469,995 | $1,416,755 | $1,331,268 | Net Earnings and EPS (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net earnings | $124,610 | $95,027 | $312,160 | $304,919 | | Basic net earnings per share | $1.36 | $1.04 | $3.40 | $3.33 | | Diluted net earnings per share | $1.35 | $1.03 | $3.38 | $3.30 | | Comprehensive earnings | $152,284 | $175,320 | $388,565 | $364,698 | Condensed Consolidated Balance Sheets This statement details RLI Corp.'s financial position, including assets, liabilities, and shareholders' equity Key Balance Sheet Items (in thousands) | Metric | September 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total investments and cash | $4,690,177 | $4,084,631 | | Total assets | $6,247,000 | $5,628,802 | | Unpaid losses and settlement expenses | $2,873,054 | $2,693,470 | | Unearned premiums | $1,035,756 | $984,140 | | Total liabilities | $4,372,824 | $4,106,835 | | Total shareholders' equity | $1,874,176 | $1,521,967 | | Total liabilities and shareholders' equity | $6,247,000 | $5,628,802 | Condensed Consolidated Statements of Shareholders' Equity This statement outlines changes in RLI Corp.'s shareholders' equity, including net earnings and dividends Shareholders' Equity Changes (in thousands) | Metric | Balance, Jan 1, 2025 | Balance, Sep 30, 2025 | | :--- | :--- | :--- | | Total Common Shareholders' Equity | $1,521,967 | $1,874,176 | | Net earnings | $63,214 (Q1) + $124,336 (Q2) + $124,610 (Q3) | - | | Other comprehensive earnings (loss), net of tax | $30,030 (Q1) + $18,701 (Q2) + $27,674 (Q3) | - | | Dividends and dividend equivalents | $(13,776) (Q1) + $(14,706) (Q2) + $(14,698) (Q3) | - | - Total shareholders' equity increased from $1,521,967 thousand at January 1, 2025, to $1,874,176 thousand at September 30, 2025, driven by net earnings and other comprehensive earnings, partially offset by dividends[15] Condensed Consolidated Statements of Cash Flows This statement summarizes RLI Corp.'s cash inflows and outflows from operating, investing, and financing activities Cash Flow Summary (in thousands) | Cash Flow Type | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $457,453 | $432,139 | | Net cash used in investing activities | $(402,518) | $(372,088) | | Net cash used in financing activities | $(42,104) | $(35,841) | | Net increase in cash | $12,831 | $24,210 | | Cash at September 30, | $52,621 | $60,634 | Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations of RLI Corp.'s financial statements, accounting policies, and specific components 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note describes the basis of financial statement preparation and key accounting policies, including stock split adjustments - The unaudited interim condensed consolidated financial statements are prepared in accordance with GAAP and reflect all necessary adjustments of a normal and recurring nature[20] - On January 15, 2025, RLI Corp. effected a two-for-one stock split, retroactively adjusting all share and per share information[22] - New accounting standards (ASU 2023-09, 2024-03, 2025-06) are disclosure-related or not expected to materially impact financial statements[24][26][29] D. REINSURANCE This note details reinsurance balances recoverable, associated credit risk, and allowances for uncollectible amounts - Reinsurance balances recoverable are reported as assets and are subject to credit risk, which the Company monitors through financial condition reviews and credit ratings[30] Allowances for Uncollectible Reinsurance Balances (in millions) | Metric | September 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Allowance for uncollectible paid reinsurance balances | $17 | $17 | | Allowance for uncollectible unpaid reinsurance balances | $11 | $10 | E. INTANGIBLE ASSETS This note provides information on goodwill and other intangible assets, including impairment assessments Goodwill and Intangible Assets (in thousands) | Asset Type | September 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Goodwill (Surety) | $40,816 | $40,816 | | Goodwill (Casualty) | $5,246 | $5,246 | | Indefinite-lived intangibles | $7,500 | $7,500 | | Total goodwill and intangibles | $53,562 | $53,562 | - Annual impairment assessments performed in Q2 2025 found no impairment of goodwill or indefinite-lived intangible assets, and no triggering events as of September 30, 2025[34] F. EARNINGS PER SHARE This note presents basic and diluted earnings per share calculations and weighted average share counts Basic and Diluted EPS (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Basic EPS | $1.36 | $1.04 | $3.40 | $3.33 | | Diluted EPS | $1.35 | $1.03 | $3.38 | $3.30 | | Weighted average basic shares | 91,849 | 91,559 | 91,816 | 91,467 | | Weighted average diluted shares | 92,310 | 92,441 | 92,460 | 92,370 | G. COMPREHENSIVE EARNINGS This note explains comprehensive earnings, including unrealized gains/losses on fixed income securities and tax impacts - Comprehensive earnings include net earnings plus after-tax unrealized gains and losses on available-for-sale fixed income portfolio, using a 21% federal statutory tax rate[37] Other Comprehensive Earnings (Loss) (in thousands) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net current-period other comprehensive earnings (loss) | $27,674 | $80,293 | $76,405 | $59,779 | | Beginning balance (Accumulated OCI) | $(124,992) | $(186,817) | $(173,723) | $(166,303) | | Ending balance (Accumulated OCI) | $(97,318) | $(106,524) | $(97,318) | $(106,524) | - Unrealized gains, net of tax, from the fixed income portfolio increased to $76 million for the first nine months of 2025 (vs. $60 million in 2024) due to decreasing interest rates[38] H. FAIR VALUE MEASUREMENTS This note describes the fair value hierarchy and classification of financial instruments, including investments - Fair value is determined using a hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[43][44][45] - Corporate, Agency, Government, Municipal bonds, and most MBS/CMBS/ABS are classified as Level 2. Regulation D private placement securities are Level 3[47][48][49] - Nearly all equity holdings are Level 1 (exchange-traded), with some Level 2 and Level 3 for non-exchange traded equities[52] 2. INVESTMENTS This note details the investment portfolio, including fixed income and equity securities, and realized gains/losses - The investment portfolio primarily consists of fixed income debt securities (available-for-sale, at fair value) and common stock equity securities (at fair value)[54] Net Realized Gains (Losses) from Investment Dispositions (in thousands) | Investment Type | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | | Fixed income securities - available-for-sale | $1,857 | $(1,951) | | Equity securities | $45,487 | $19,936 | | Fixed income securities - calls/maturities | $199 | $(973) | Fair Value Measurements by Level (in thousands) | Asset Type | Sep 30, 2025 (Level 1) | Sep 30, 2025 (Level 2) | Sep 30, 2025 (Level 3) | Dec 31, 2024 (Level 1) | Dec 31, 2024 (Level 2) | Dec 31, 2024 (Level 3) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Fixed income securities | $0 | $3,439,225 | $97,259 | $0 | $3,085,293 | $90,503 | | Equity securities | $874,621 | $0 | $4,251 | $731,569 | $0 | $4,622 | | Total | $874,621 | $3,439,225 | $101,510 | $731,569 | $3,085,293 | $95,125 | Allowance for Credit Losses and Unrealized Losses on Fixed Income Securities This note discusses allowances for credit losses and unrealized losses on available-for-sale fixed income securities - An allowance for credit losses is recognized for available-for-sale fixed income securities based on criteria like changes in technology, non-payment, operating losses, or credit downgrades[60][63] Allowance for Expected Credit Losses on Available-for-Sale Securities (in thousands) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Beginning balance | $245 | $228 | $197 | $306 | | Increase to allowance | $717 | $30 | $720 | $30 | | Net increase (decrease) | $(63) | $(24) | $(18) | $(13) | | Balance as of Sep 30, | $899 | $234 | $899 | $234 | - As of September 30, 2025, 1,077 fixed income securities had unrealized losses totaling $150 million (4% of cost basis), with 926 in loss positions for 12+ months. The Company expects to recover amortized cost[62] Other Invested Assets This note provides details on other invested assets, including LIHTC, HTC, FHLBC membership, and private funds - Other invested assets totaled $56 million at September 30, 2025, down from $58 million at December 31, 2024. These include LIHTC, HTC, FHLBC membership, and private funds[66] - LIHTC interests increased to $10 million (from $7 million) with $4 million unfunded commitment. HTC investment decreased to $12 million (from $15 million) with $4 million unfunded commitment[68][69] - Investments in private funds decreased to $18 million (from $24 million) with $3 million unfunded commitments[71] Investments in Unconsolidated Investees This note describes investments in unconsolidated entities, primarily Prime Holdings Insurance Services, Inc - Investments in unconsolidated investees increased to $64 million at September 30, 2025, from $56 million at December 31, 2024, primarily due to the $63 million investment in Prime Holdings Insurance Services, Inc[72] Cash and Short-Term Investments This note presents the balances of cash and short-term investments at period-end Cash and Short-Term Investments (in thousands) | Metric | September 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash | $52,621 | $39,790 | | Short-term investments | $165,706 | $74,915 | 3. HISTORICAL LOSS AND LAE DEVELOPMENT This note reconciles unpaid losses and loss adjustment expenses (LAE) and discusses prior year reserve development Unpaid Losses and LAE Reconciliation (in thousands) | Metric | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | | Net unpaid losses and LAE at beginning of year | $1,938,045 | $1,688,676 | | Total incurred losses and LAE | $549,814 | $513,741 | | Total paid losses and LAE | $(384,416) | $(350,016) | | Net unpaid losses and LAE at Sep 30, | $2,103,443 | $1,852,401 | - Favorable development on prior years' loss reserves contributed $74 million to incurred losses and LAE in 2025 (vs. $85 million in 2024), primarily from commercial excess liability, marine, surety, and commercial property[74][75] - Auto liability exposures developed adversely in 2025, particularly in commercial transportation[74] 4. INCOME TAXES This note details the effective tax rates and factors influencing tax expense, including legislative impacts Effective Tax Rates | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended Sep 30, | 20.8% | 18.7% | | Nine Months Ended Sep 30, | 20.4% | 19.8% | - The effective tax rate was higher in 2025 due to lower tax-favored adjustments and higher pretax income, which reduced the percentage impact of these adjustments[76] - The One Big Beautiful Bill Act (OBBBA) signed on July 4, 2025, did not materially impact the Company's financial statements[79] 5. STOCK BASED COMPENSATION This note describes the Company's stock-based compensation plans, expense, and unrecognized compensation - The 2023 RLI Corp. Long-Term Incentive Plan (LTIP) replaced the 2015 LTIP, authorizing 8,009,782 shares for equity-based compensation[80][81] Stock-Based Compensation Expense (in millions) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended Sep 30, | $2 | $6 | | Nine Months Ended Sep 30, | $2 | $6 | - Total unrecognized compensation expense for outstanding and unvested awards was $7 million, to be recognized over a weighted average vesting period of 2.53 years[82] Stock Options This note provides details on stock option activity, vesting, exercise prices, and intrinsic value - Stock options generally vest over five years and expire eight years after grant, with immediate expensing for retirement-eligible participants[84][85] Stock Option Activity (Nine Months Ended Sep 30, 2025) | Metric | Options | Weighted Average Exercise Price | | :--- | :--- | :--- | | Outstanding at Jan 1, 2025 | 2,837,938 | $52.80 | | Granted | 280,680 | $72.98 | | Exercised | (81,518) | $29.47 | | Canceled/Forfeited | (36,150) | $64.51 | | Outstanding at Sep 30, 2025 | 3,000,950 | $55.18 | | Exercisable at Sep 30, 2025 | 1,909,058 | $48.94 | - The intrinsic value of options exercised was $4 million for the first nine months of 2025, significantly lower than $19 million in 2024[87] Restricted Stock Units This note outlines restricted stock unit activity, vesting schedules, and fair value of vested units - RSUs generally have a three-year cliff vesting for employees (accelerated for retirement-eligible) and vest within one year for directors, accruing dividends as additional units[89] Restricted Stock Unit Activity (Nine Months Ended Sep 30, 2025) | Metric | RSUs | Weighted Average Grant Date Fair Value | | :--- | :--- | :--- | | Nonvested at Jan 1, 2025 | 99,095 | $67.54 | | Granted | 36,901 | $74.40 | | Vested | (36,821) | $64.77 | | Nonvested at Sep 30, 2025 | 96,426 | $71.10 | - The total fair value of vested RSUs was $3 million for the first nine months of 2025, up from $2 million in 2024[89] 6. OPERATING SEGMENT INFORMATION This note presents financial performance by operating segment: property, casualty, and surety, including underwriting income - The Company's performance is assessed across three segments: property, casualty, and surety, using earnings before income taxes (underwriting income) and combined ratio[91][93] Net Premiums Earned by Segment (in thousands) | Segment | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Casualty | $243,508 | $219,638 | $707,194 | $627,014 | | Property | $126,689 | $133,266 | $389,897 | $396,774 | | Surety | $37,498 | $36,585 | $110,853 | $105,442 | | Grand Total | $407,695 | $389,489 | $1,207,944 | $1,129,230 | Segment Earnings Before Income Taxes (in thousands) | Segment | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Casualty | $4,486 | $2,549 | $14,846 | $26,538 | | Property | $50,424 | $30,402 | $156,850 | $141,298 | | Surety | $5,635 | $7,741 | $21,625 | $20,575 | | Total Segment Earnings | $60,545 | $40,692 | $193,321 | $188,411 | 7. LEASES This note details operating lease assets and liabilities, lease costs, and weighted-average lease terms and discount rates - Operating lease ROU assets and liabilities are recognized based on the present value of future minimum lease payments, using the incremental borrowing rate[101] Lease Costs (in thousands) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Operating lease cost | $1,040 | $1,149 | $3,270 | $3,483 | | Variable lease cost | $323 | $351 | $1,112 | $966 | | Sublease income | $(42) | $(42) | $(127) | $(127) | | Total lease cost | $1,321 | $1,458 | $4,255 | $4,322 | Operating Lease Balances | Metric | September 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Operating lease ROU assets | $11,629 | $14,016 | | Operating lease liabilities | $13,320 | $15,711 | | Weighted-average remaining lease term | 5.91 years | 6.01 years | | Weighted-average discount rate | 3.76% | 3.63% | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on RLI Corp.'s financial condition, operations, and key performance drivers OVERVIEW This overview describes RLI Corp. as a specialty insurer focused on niche markets and consistent underwriting profitability - RLI Corp. is a U.S.-based specialty insurance company focused on niche markets, underwriting select property, casualty, and surety products[105] - The Company achieved its 29th consecutive year of underwriting profitability in 2024, with an average combined ratio of 88.1 over that period[107] - Profitability is measured by underwriting income and combined ratios across property, casualty, and surety segments, with a primary focus on underwriting profitability over premium growth[108][113] Key Performance Measures This section defines key performance measures like underwriting income and combined ratio used to assess profitability - Underwriting income is a pretax measure of insurance operations profitability, calculated by subtracting losses, policy acquisition costs, and insurance operating expenses from net premiums earned[115] - The combined ratio, a common industry performance measure, is the sum of the loss ratio (losses/net premiums earned) and the expense ratio (policy acquisition costs + insurance operating expenses / net premiums earned)[117] Reconciliation of Net Earnings to Net Underwriting Income (in thousands) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net earnings | $124,610 | $95,027 | $312,160 | $304,919 | | Earnings before income taxes | $157,245 | $116,825 | $392,391 | $380,119 | | Net underwriting income | $60,545 | $40,692 | $193,321 | $188,411 | Critical Accounting Policies This section highlights critical accounting policies involving significant estimates for liabilities and investment valuation - Critical accounting policies involve significant estimates for liabilities, investment valuation, reinsurance recoverability, deferred policy acquisition costs, and deferred taxes[119] - No significant changes to critical accounting policies occurred during the year[120] RESULTS OF OPERATIONS This section analyzes RLI Corp.'s financial results, comparing performance across different reporting periods Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024 This section compares RLI Corp.'s consolidated revenues and underwriting performance for the nine-month periods Consolidated Revenues (in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net premiums earned | $1,207,944 | $1,129,230 | | Net investment income | $117,414 | $103,502 | | Net realized gains | $48,234 | $11,222 | | Net unrealized gains on equity securities | $43,163 | $87,314 | | Total consolidated revenue | $1,416,755 | $1,331,268 | - Net premiums earned increased 7%, driven by casualty and surety segments. Investment income rose 13% due to higher asset base and reinvestment rates[121] - Underwriting income was $193 million (84.0 combined ratio) in 2025, up from $188 million (83.3 combined ratio) in 2024, benefiting from lower catastrophe losses ($26 million vs $67 million) but offset by lower favorable reserve development ($74 million vs $85 million)[123] Premiums This section analyzes gross and net premiums written and earned by segment for the nine-month periods Gross and Net Premiums by Segment (Nine Months Ended Sep 30, in thousands) | Segment | Gross Premiums Written 2025 | Gross Premiums Written 2024 | % Change (GPW) | Net Premiums Earned 2025 | Net Premiums Earned 2024 | % Change (NPE) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Casualty | $902,127 | $826,152 | 9% | $707,194 | $627,014 | 13% | | Property | $536,500 | $590,191 | (9)% | $389,897 | $396,774 | (2)% | | Surety | $124,981 | $123,495 | 1% | $110,853 | $105,442 | 5% | | Grand Total | $1,563,608 | $1,539,838 | 2% | $1,207,944 | $1,129,230 | 7% | - Casualty gross premiums increased 9% due to positive rate movement, new personal umbrella business, and expanded marketing for commercial excess and general liability[131] - Property gross premiums decreased 9% due to declining commercial property rates and increased competition, despite growth in marine and other property lines[132] Underwriting Income This section details underwriting income and combined ratios by segment for the nine-month periods Underwriting Income and Combined Ratio by Segment (Nine Months Ended Sep 30, in thousands) | Segment | Underwriting Income 2025 | Underwriting Income 2024 | Combined Ratio 2025 | Combined Ratio 2024 | | :--- | :--- | :--- | :--- | :--- | | Casualty | $14,846 | $26,538 | 97.9 | 95.8 | | Property | $156,850 | $141,298 | 59.8 | 64.4 | | Surety | $21,625 | $20,575 | 80.5 | 80.5 | | Total | $193,321 | $188,411 | 84.0 | 83.3 | - Casualty underwriting income decreased due to lower prior accident year reserve releases ($28 million vs $42 million) and higher current year loss reserves, increasing the loss ratio to 61.9% (from 58.9%)[135][136] - Property underwriting income increased, with a lower combined ratio (59.8% vs 64.4%) driven by reduced catastrophe losses ($24 million vs $63 million), despite higher expense ratio due to investments[137][138] Investment Income This section discusses net investment income and fixed income investment yields for the nine-month periods - Net investment income increased 13% to $117 million for the first nine months of 2025, driven by higher reinvestment rates and an increased average asset base[141] Fixed Income Investment Yields (Nine Months Ended Sep 30) | Yield Type | 2025 | 2024 | | :--- | :--- | :--- | | Pretax Taxable | 4.10% | 3.79% | | Pretax Tax-Exempt | 2.83% | 2.88% | | After-Tax Taxable | 3.24% | 2.99% | | After-Tax Tax-Exempt | 2.68% | 2.73% | - The fixed income portfolio increased by $361 million, and the equity portfolio increased by $143 million, primarily due to market strength and cash flow allocation[143] Income Taxes This section analyzes the effective tax rate for the nine-month periods and influencing factors - The effective tax rate for the first nine months of 2025 was 20.4%, up from 19.8% in 2024, due to lower tax-favored adjustments and higher pretax income[144] Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024 This section compares RLI Corp.'s consolidated revenues and underwriting performance for the three-month periods Consolidated Revenues (in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net premiums earned | $407,695 | $389,489 | | Net investment income | $41,270 | $36,694 | | Net realized gains | $18,318 | $5,420 | | Net unrealized gains on equity securities | $41,981 | $38,392 | | Total consolidated revenue | $509,264 | $469,995 | - Net premiums earned increased 5%, driven by casualty and surety segments. Investment income rose 12% due to higher asset base and reinvestment rates[145] - Underwriting income was $61 million (85.1 combined ratio) in Q3 2025, up from $41 million (89.6 combined ratio) in Q3 2024, primarily due to minimal catastrophe losses in 2025 (vs. $39 million in 2024)[148] Premiums This section analyzes gross and net premiums written and earned by segment for the three-month periods Gross and Net Premiums by Segment (Three Months Ended Sep 30, in thousands) | Segment | Gross Premiums Written 2025 | Gross Premiums Written 2024 | % Change (GPW) | Net Premiums Earned 2025 | Net Premiums Earned 2024 | % Change (NPE) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Casualty | $317,063 | $294,267 | 8% | $243,508 | $219,638 | 11% | | Property | $154,631 | $173,813 | (11)% | $126,689 | $133,266 | (5)% | | Surety | $38,527 | $39,710 | (3)% | $37,498 | $36,585 | 2% | | Grand Total | $510,221 | $507,790 | 0% | $407,695 | $389,489 | 5% | - Casualty gross premiums increased 8% due to positive rate movement and new business growth, offsetting declines in other casualty programs[155] - Property gross premiums decreased 11% due to declining commercial property rates and increased competition, despite growth in other property lines[156] Underwriting Income This section details underwriting income and combined ratios by segment for the three-month periods Underwriting Income and Combined Ratio by Segment (Three Months Ended Sep 30, in thousands) | Segment | Underwriting Income 2025 | Underwriting Income 2024 | Combined Ratio 2025 | Combined Ratio 2024 | | :--- | :--- | :--- | :--- | :--- | | Casualty | $4,486 | $2,549 | 98.2 | 98.8 | | Property | $50,424 | $30,402 | 60.2 | 77.2 | | Surety | $5,635 | $7,741 | 85.0 | 78.8 | | Total | $60,545 | $40,692 | 85.1 | 89.6 | - Casualty underwriting income increased due to improved current accident year losses, lowering the loss ratio to 62.0% (from 62.8%)[159][160] - Property underwriting income significantly increased, with a lower combined ratio (60.2% vs 77.2%) driven by lower catastrophe losses in 2025[161][162] Investment Income This section discusses net investment income and fixed income investment yields for the three-month periods - Net investment income increased 12% to $41 million for the third quarter of 2025, driven by higher reinvestment rates and an increased average asset base[166] Fixed Income Investment Yields (Three Months Ended Sep 30) | Yield Type | 2025 | 2024 | | :--- | :--- | :--- | | Pretax Taxable | 4.19% | 3.86% | | Pretax Tax-Exempt | 2.69% | 2.98% | | After-Tax Taxable | 3.31% | 3.05% | | After-Tax Tax-Exempt | 2.55% | 2.82% | Income Taxes This section analyzes the effective tax rate for the three-month periods and influencing factors - The effective tax rate for the third quarter of 2025 was 20.8%, up from 18.7% in 2024, due to lower tax-favored adjustments and higher pretax income[168] LIQUIDITY AND CAPITAL RESOURCES This section discusses RLI Corp.'s cash flows, debt, investment portfolio, and dividend policy - Operating cash flows provided $457 million in the first nine months of 2025, an increase from $432 million in 2024, driven by higher premium and investment income[170] Cash Flow Summary (in thousands) | Cash Flow Type | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | | Operating cash flows | $457,453 | $432,139 | | Investing cash flows | $(402,518) | $(372,088) | | Financing cash flows | $(42,104) | $(35,841) | | Total | $12,831 | $24,210 | - The Company had $100 million in debt outstanding as of September 30, 2025, including $50 million from a revolving line of credit with PNC Bank and $50 million from FHLBC[171] - The investment portfolio increased by $606 million from December 31, 2024, to $4.69 billion at September 30, 2025, with 75.4% in fixed income and 18.8% in equity[176] - RLI Corp. has increased dividends for 50 consecutive years, paying a regular quarterly cash dividend of $0.16 per share[187] - Dividends from the principal insurance subsidiary to RLI Corp. are restricted by Illinois state insurance laws, with $1 million of unrestricted net assets available as of September 30, 2025[188][190] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section addresses RLI Corp.'s exposure to market risks, including equity price and interest rate risks - No material changes to market risk exposure since the 2024 Annual Report on Form 10-K[191] - Primary market risks include equity price risk (equity securities) and interest rate risk (fixed income securities)[192] - The Company consistently invests in high credit quality, investment grade securities[192] Item 4. Controls and Procedures This section confirms the effectiveness of RLI Corp.'s disclosure controls and internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective as of September 30, 2025, providing reasonable assurance for financial statement reliability[193][194] - No material changes were made to internal control over financial reporting during the last fiscal quarter[195] Part II - Other Information This part includes disclosures on legal proceedings, risk factors, equity sales, defaults, mine safety, and other information Item 1. Legal Proceedings This section reports no material changes regarding legal proceedings - No material changes to report regarding legal proceedings[197] Item 1A. Risk Factors This section reports no material changes regarding risk factors - No material changes to report regarding risk factors[198] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the reporting period - This item is not applicable[199] Item 3. Defaults upon Senior Securities This item is not applicable for the reporting period - This item is not applicable[200] Item 4. Mine Safety Disclosures This item is not applicable for the reporting period - This item is not applicable[201] Item 5. Other Information This section reports no Rule 10b5-1 trading arrangement adoptions or terminations by directors or officers - 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 September 30, 2025[203] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including certifications (Sections 302 and 906 of Sarbanes-Oxley Act) and Inline XBRL documents - Exhibits include certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[204] - Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbases, and Cover Page Interactive Data File) are filed[204] SIGNATURES This section contains the official signatures for the report, confirming its submission Signature Block The report is signed on behalf of RLI Corp. by Todd W. Bryant, Chief Financial Officer (Principal Financial and Chief Accounting Officer), dated October 22, 2025 - The report was signed by Todd W. Bryant, Chief Financial Officer, on October 22, 2025[209]