RLI 10-K & 10-Q changes, risk factors and insider trading
Rli Corp. · NYSE · Fire, Marine & Casualty Insurance · CIK 84246 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
Largest changes
We contract with a number of third-party vendors to support our business. For example, we have license agreements for software that we use to model natural catastrophes, process claims, and manage policies, producers and financial processes. The vendors range from large national companies, who are dominant in their area of expertise and would be difficult to quickly replace, to smaller or start-up vendors with leading technology, but with shorter operating histories and fewer financial resources. Failures of certain vendors to provide services could adversely affect our ability to deliver products and services to our customers, disrupting our business and causing the Company to incur significant expense. If one or more of our vendors experience a cybersecurity breach; fail to use artificial intelligence reliably and in compliance with applicable laws; or fail to protect personal information of our customers, claimants or employees, we may incur operational impairments, or could be exposed to litigation, compliance costs or reputational damage. We maintain a vendor management program to establish procurement policies and to monitor vendor risk, including the security and stability of our critical vendors.see in full comparison
Full comparison: every changed paragraph (5)
We market our insurance products through brokers, agents and carrier partners. In 2024,2025, 4649 percent of our gross premiums written were produced through eightten producer entities, while no other entity’s production exceeded 2 percent of our gross premiums written. Accordingly, our business is dependent on the willingness of these agents, brokers and carrier partners to recommend our products to their customers, who may also promote and distribute the products of our competitors. Loss of all or a substantial portion of the business written through these parties could have a material adverse effect on our business.
Factors such as business revenue, construction spending, government spending,spending and policies, tariffs, the volatility and strength of the capital markets and inflation can all affect the business and economic environment. These same factors affect our ability to generate revenue and profits. Insurance premiums in our markets are heavily dependent on our customercustomers’ revenues, payroll, value of goods transported, miles traveled and number of new projects initiated. In an economic downturn characterized by higher unemployment, declines in construction spending and reduced corporate revenues, the demand for insurance products is adversely affected. Adverse changes in the economy may lead our customers to have less need or desire for insurance coverage, to cancel existing insurance policies, to modify coverage or to not renew with the Company, all of which affect our ability to generate revenue. In addition, as approximately a third of our business relates to the construction industry, our results of operations could be significantly impacted in an economic downturn if the construction industry is affected disproportionally.disproportionately.
We contract with a number of third-party vendors to support our business. For example, we have license agreements for software that we use to model natural catastrophes, process claims, and manage policies, producers and financial processes. The vendors range from large national companies, who are dominant in their area of expertise and would be difficult to quickly replace, to smaller or start-up vendors with leading technology, but with shorter operating histories and fewer financial resources. Failures of certain vendors to provide services could adversely affect our ability to deliver products and services to our customers, disrupting our business and causing the Company to incur significant expense. If one or more of our vendors experience a cybersecurity breach; fail to use artificial intelligence reliably and in compliance with applicable laws; or fail to protect personal information of our customers, claimants or employees, we may incur operational impairments, or could be exposed to litigation, compliance costs or reputational damage. We maintain a vendor management program to establish procurement policies and to monitor vendor risk, including the security and stability of our critical vendors.
We rely on multiple computer systems to interact with producers and customers, issue policies, pay claims, run modeling functions, assess insurance risks and complete various important internal processes including accounting and bookkeeping. Our business is highly dependent on our ability to access these systems to perform necessary business functions. Additionally, some of these systems may include or rely upon third-party systems not located on our premises. Any of these systems may be exposed to unplanned interruption, unreliability or intrusion from a variety of causes, including among others, storms and other natural disasters, terrorist attacks, cyber attacks, errors or inaccuracies in artificial intelligence systems, utility outages or complications encountered as existing systems are replaced or upgraded.
Although we have investigated and closed a substantial numbermajority of COVID-19-related claims without payment, state and federal courts could rule that such claims are covered under our policies. Court decisions upholding our position that these COVID-19 related claims are not covered under our policies could also be overturned on appeal. These actions could result in an increase in claims and paid losses, which could have a materially adverse effect on our financial performance. Such appellate court decisions may take several years to become final and their ultimate outcome remains uncertain at this time.
Management's Discussion & Analysis (MD&A)
Largest changes
“In 2025, we recorded $4 million in investee losses for Prime, compared to $5 million of investee losses in 2024. We perform annual impairment reviews of our investments in unconsolidated investees. During 2025, continued difficult trends for commercial auto exposures, including industry wide increases in loss costs and adverse development, resulted in a $10 million non-cash impairment charge, which was recognized in equity in earnings of unconsolidated investees. The loss in 2024 was reflective of Prime strengthening loss reserves on a number of prior accident years. …”see in full comparison
“In 2025 and 2024, RLI Ins. paid ordinary dividends totaling $139 million and $152 million, respectively, to RLI Corp. Any dividend distribution in excess of the ordinary dividend limits is deemed extraordinary and requires prior approval from the IDOI. In 2025, our principal insurance subsidiary sought and received regulatory approval prior to the payment of extraordinary dividends totaling $151 million. No extraordinary dividends were paid in 2024. …”see in full comparison
Ordinary dividends, which may be paid by our principal insurance subsidiary without prior regulatory approval, are subject to certain limitations based upon statutory income, surplus and earned surplus. The maximum ordinary dividend distribution from our principal insurance subsidiary in a rolling 12-month period is limited by Illinois law to the greater of 10 percent of RLI Ins. policyholder surplus, as of December 31 of the preceding year, or the net income of RLI Ins. for the 12-month period ending December 31 of the preceding year. Ordinary dividends are further restricted by the requirement that they be paid from earned surplus.see in full comparisonIn 2024 and 2023, RLI Ins. paid ordinary dividends totaling $152 million and $145 million, respectively, to RLI Corp. Any dividend distribution in excess of the ordinary dividend limits is deemed extraordinary and requires prior approval from the IDOI. No extraordinary dividends were paid in 2024 or 2023. Although RLI Ins. was restricted from distributing ordinary dividends to RLI Corp. as of December 31, 2024, the rolling 12-month limitations reset as of January 1st. A total of $241 million in ordinary dividend capacity will be available over the course of 2025. In addition to restrictions from our principal subsidiary’s insurance regulator, we also consider internal models and how capital adequacy is defined by our rating agencies in determining amounts available for distribution.
“Gross premiums written in the surety segment increased by $1 million in 2025. Growth in transactional surety was driven by targeted marketing initiatives and continued investment in our distribution capabilities. Commercial surety premium increased as we secured new accounts through collaboration with our distribution partners. These increases were partially offset by a decline in contract surety premium, reflecting a slowdown in construction spending. We remain well positioned to support future business as infrastructure projects at the federal, state and local levels receive funding. …”see in full comparison
“Gross premiums written for the surety segment were up $14 million in 2024 and we continue to invest in infrastructure to support long-term growth. Contract surety benefited from new agency relationships, new construction projects and elevated material costs, while transactional surety grew organically by leveraging existing relationships from complementary products. Despite a highly competitive commercial surety market, the expansion of existing accounts and new business also allowed for premium growth. Industry loss ratios have increased, particularly in the contract surety space. …”see in full comparison
“Gross premiums written for the property segment decreased $71 million in 2025. After several consecutive years of rate increases, pricing for commercial property exposures declined during the year as competition intensified among carriers and managing general agents, and some insureds elected to retain more risk. We maintained underwriting discipline by selectively retaining high-quality accounts and forgoing opportunities that did not meet our underwriting standards. …”see in full comparison
Full comparison: every changed paragraph (59)
RLI Corp. is a U.S. based,U.S.-based, specialty insurance company that underwrites select property, casualty and surety products through three major subsidiaries collectively known as RLI Insurance Group (Group). Our focus is on niche markets and developing unique products that are tailored to customers’ needs. We hire underwriters and claim examiners with deep expertise and provide exceptional customer service and support. We maintain a highly diverse product portfolio and underwrite for profit in all market conditions. In 2024,2025, we achieved our 29th30th consecutive year of underwriting profitability. Over the 29-year30-year period, we averaged an 88.187.9 combined ratio. This drives our ability to provide shareholder returns in three different ways: the underwriting income itself, net investment income from our investment portfolio and long-term appreciation in our equity portfolio.
On December 15, 2025, RLI Corp. effected a two-for-one split of its common stock and a proportionate increase in the number of authorized shares. All share and per share information throughout this report has been retroactively adjusted to reflect the stock split.
FollowingThe following is a list of key performance measures found throughout this reportreport, with theirincluding definitions, relationships to GAAP measures and explanations of their importance to our operations.
FollowingThe following is a table of significant risk factors involved in estimating losses grouped by major product line. We distinguish between loss ratio risk and reserve estimation risk. Loss ratio risk refers to the possible dispersion of loss ratios from year to year due to inherent volatility in the business, such as high severity or aggregating exposures. Reserve estimation risk recognizes the difficulty in estimating a given year’s ultimate loss liability. As an example, our property catastrophe business (included below in commercial and other property) has significant variance in year over year results; however, its reserving estimation risk is relatively moderate.
Our best estimate of ultimate loss and LAE reserves are proposed by our lead reserving actuary and then discussed and approved by our Loss Reserve Committee (LRC). The LRC is made up of various members of the management team including the leadappointed reserving actuary, corporate actuary, chief executive officer, chief operating officer, chief financial officer, chief claim officer, chief legal officer and other selected executives. As part of the discussion with the LRC, the analysis supporting the actuarial central estimate of the IBNR reserve by product is reviewed. The actuaries also present explanations supporting any changes to the underlying assumptions used to calculate the indicated central estimate. Our actuaries make a recommendation to management in regard to booked reserves that reflect both their analytical assessment and relevant qualitative factors, such as their view of estimation risk. After discussion ofdiscussing these analyses,analyses recommendationswith the LRC and considering all relevant risk factors among the LRC,factors, our actuaries determine whether the reserve balances require further adjustment.
This section of this Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K10-K, but can be found in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023,2024, incorporated herein by reference.
Consolidated revenue for 20242025 totaled $1.8$1.9 billion, up $258$112 million from 2023.2024. Net premiums earned for the Group increased 186 percent, driven primarily by growth from our property and casualty segments.segment. Positive equity market returns during 20242025 resulted in $82$43 million of unrealized gains on equity securities, building on a rally that led to $65$82 million of unrealized gains in our equity portfolio during 2023.2024. Net investment income increased by 1812 percent in 2024,2025, primarily due to higher reinvestment rates and a larger average asset base relative to the prior year.
Net earnings for 20242025 totaled $346$403 million, up from $305$346 million in 2023.2024. Improved underwriting income was bolstered by an increase in investment income and larger unrealized gains on equity securities.income.
We surpassed $2 billion in gross premiums written for the first time and achieved our 29th30th consecutive year of underwriting profitability in 2025. Gross premiums written increased 1 percent and net premiums earned increased 6 percent in 2025, when compared to 2024. Our track record of success is built on underwriting discipline and oura diversified product portfolio,portfolio whichthat allowallows us to navigate variousevolving markets.market conditions. While we may contract in some products when markets soften, we capitalize on growth opportunities in others.
Gross premiums written increased $206 million, or 11 percent, in 2024 when compared to 2023, with all three segments contributing. Despite competitive conditions, a relatively strong economy and positive rate movement benefited much of the insurance portfolio. Net premiums earned were up 18 percent in 2024.
Underwriting income was $264 million on an 83.6 combined ratio in 2025, compared to $211 million on an 86.2 combined ratio in 2024, compared to $173 million on an 86.6 combined ratio in 2023.2024. Underwriting results for 2025 included $30 million of losses from catastrophe events. Comparatively, 2024 included $76 million of pretax losses from Hurricanes Beryl, Helene and Milton, as well as $30 million of other storm losses. Comparatively, 2023 included $49 million of pretax losses and $12 million of reinsurance reinstatement premium from the Hawaiian wildfires, as well as $31 million of other storm losses. Results for each period benefited from favorable development on prior years’ loss reserves, which provided additional pretax earnings of $99 million in 2025, compared to $95 million in 2024, compared to $109 million in 2023.2024. Further discussion of reserve development can be found in note 5 to the consolidated financial statements within Item 8, Financial Statements and Supplementary Data.
The loss ratio was 48.445.0 in 2024,2025, compared to 46.748.4 in 2023.2024. The increasedecrease reflects higherlower net retained catastrophe losses in 2024,2025 lowerand higher prior period reserve releases and the strengthening of current accident year casualty reserves, primarily on auto exposures. An offsetting loss ratio benefit was a modest improvement in the property segment’s current accident year attritional, non-catastrophe loss ratio.releases. The expense ratio decreasedincreased to 38.6 in 2025, from 37.8 in 2024,2024. fromIncreased 39.9expenses inwere 2023.driven Growth of net premiums earned allowed for improved leveraging of our expense base, despiteby continued investments in our people and technology, as well as higher acquisition-related costs, which can fluctuate based on our mix of business. Additionally, higher levels of bonus and profit-sharing expense that resulted from improved operating performance.
A large portion of our reinsurance placements renewed on January 1, 2025.2026. ForWe secured 15 to 20 percent rate decreases on our catastrophe programs and more modest relief on our property treaties,working thelayers. risk-adjustedWith rateour changereduced wasexposure downand 10continuing percentsoft market conditions, we purchased $150 million less catastrophe limit for 2026. However, we remain prepared to 20increase percent,our withexposure greaterand decreasesprocure inadditional thereinsurance highercapacity layers.should Prepaidconditions reinstatements were added back to the bottom half of the catastrophe tower, which reduces the net loss impact on catastrophe events.improve. The risk-adjusted rate change for our casualty treaties was plusdown or minusapproximately 5 percent, depending on the underlying coverage.
As we look ahead to 2026, we remain focused on underwriting for profitability in a competitive and evolving market environment. While loss severity trends remain elevated, particularly for auto-related coverages, we believe the rate increases we are taking across our portfolio have established a strong foundation for underwriting results moving forward. Our underwriters continue to be incentivized and empowered to prioritize underwriting profitability over premium growth, including pulling back from underpriced or volatile sectors when the risk-reward profile does not meet our standards. We continue to invest in technology, data infrastructure and specialized underwriting talent to support granular, real-time decision-making and operational efficiency. Supported by a diversified specialty portfolio, a strong balance sheet and disciplined execution, we are optimistic about our ability to navigate market cycles and pursue profitable underwriting opportunities as conditions evolve.
Like most of the industry, we are closely monitoring the severity of auto losses, which adversely impacted our current and prior accident year losses in 2024. The goal of our business model has always been to underwrite for profit and our underwriters are incentivized to walk away from underpriced risks. We obtained rate increases across most of our insurance portfolio in 2024. However, we are not solely reliant on rate to pursue profitable underwriting. We utilize our in-house loss control team to encourage our commercial auto insureds to follow safe practices, work with producers to balance growth and exit classes of business or individual accounts that are driving loss severity. We have a strong feedback loop between our underwriting, claim and analytical teams that address new or prevailing topics, like legal system abuse. Overall, we remain optimistic about the potential underlying profitability of our product portfolio. Our investments in technology and specialized underwriting staff should put us in a position to take advantage of opportunities as we move forward.
Gross premiums written for the casualty segment increased $83 million in 2025. We continued to benefit from positive rate movement across a significant portion of products within the segment. Market conditions in personal umbrella remained favorable as competitors adjusted their appetite and terms in response to loss trends. Our approach to growth reflects reduced new business in challenging states, where we implemented higher underlying limits. Rate increases have been secured, positioning the personal umbrella portfolio for continued growth into 2026.
Premium growth in commercial excess and general liability was driven by expanded marketing efforts and increased construction activity in targeted markets, as some competitors reduced their construction-related exposure. Transportation premiums declined for the year despite higher average rates, reflecting a challenging environment characterized by economic pressures and reduced demand resulting from insured consolidation. Small commercial premium declined as we took actions to improve the quality of the portfolio. Premiums for other casualty lines also decreased during 2025, as we exited from various captive programs and reduced our participation on the reinsurance agreement with Prime.
The casualty segment remains highly diversified, allowing some products to navigate market challenges while others generate profitable growth. We believe ongoing market disruption may present both challenges and opportunities. As with all of our segments, our investments in underwriting talent and strong producer relationships position us to capitalize on favorable market conditions as they arise.
Gross premiums written for the property segment decreased $71 million in 2025. After several consecutive years of rate increases, pricing for commercial property exposures declined during the year as competition intensified among carriers and managing general agents, and some insureds elected to retain more risk. We maintained underwriting discipline by selectively retaining high-quality accounts and forgoing opportunities that did not meet our underwriting standards. We believe this approach to risk selection, together with our focus on securing appropriate pricing and terms, positions us to navigate evolving market conditions and continue to write profitable business.
Marine premium increased during 2025, supported by new business opportunities, modest rate increases and expanded product offerings. Some competitors have reduced their appetite for select Hawaii homeowner coverages, which, along with rate increases, has allowed our other property premium to grow. We expect continued growth in Hawaii homeowners at a more moderate pace in 2026, through a combination of rate actions, strong local market presence and investments in customer experience.
Gross premiums written in the surety segment increased by $1 million in 2025. Growth in transactional surety was driven by targeted marketing initiatives and continued investment in our distribution capabilities. Commercial surety premium increased as we secured new accounts through collaboration with our distribution partners. These increases were partially offset by a decline in contract surety premium, reflecting a slowdown in construction spending. We remain well positioned to support future business as infrastructure projects at the federal, state and local levels receive funding. Our underwriters actively monitor the financial condition of principals and work collaboratively with them to support achievable projects. We believe this disciplined approach to underwriting and risk selection across economic cycles will enable us to generate profitable growth over the long term.
Gross premiums written for casualty were up $147 million in 2024. We continued to benefit from positive rate movement across a large portion of our casualty segment, as well as from new business growth within our personal umbrella and small commercial distribution channels. The commercial excess product grew as new project work resulted in more business opportunities and renewal retention improved. Commercial transportation benefited from an increase in new business submissions and new products, including moving and storage as well as an excess and surplus lines offering. Our executive products premium decreased, largely due to a continued soft management liability marketplace.
The casualty segment remains highly diversified, allowing select products to work through challenges, while the success of other products allows us to achieve positive overall results. Rate filings for personal umbrella were approved in the second half of 2024, and where increases can be justified, we will be pursuing further rate increases for auto-exposed lines. With the broader industry experiencing higher loss severity trends, we see potential for ongoing market disruption. As with all our segments, our investments in underwriting talent and strong relationships with producers should put us in position to take advantage of market opportunities as they arise. However, our underwriters are incentivized and empowered to shrink our top line revenue to protect our bottom-line profitability when necessary.
Gross premiums written for the property segment were up $46 million in 2024, with commercial property contributing $15 million of that growth. Property lines within the excess and surplus market are in transition and conditions began to change mid-year. Rates for wind coverages were down in the second half of the year after multiple years of double-digit rate increases. We have started to see more competition and the deterioration of terms and conditions, but are willing to forgo opportunities that do not meet our underwriting standards. The earthquake market has also been affected by intense competition and some businesses deciding not to procure coverage.
We leverage our underwriting expertise by acting as a Lloyd’s coverholder and write coastal wind and earthquake exposures on a syndicated policy. While allowing us to diversify risk through a mechanism outside of reinsurance, this approach also allows us to generate fee income that offsets underwriting expense. Combined with the challenging property market, an increased percentage of premium being written by our syndicated partner resulted in a decline in earthquake and wind exposures for the Company. However, our fire and other peril coverage offerings experienced growth, resulting in overall premium expansion for commercial property. All coverages remain well priced and we believe there is opportunity to continue writing profitable business in these spaces.
A strong construction market and an expansion of newer offerings led to increased submissions and $21 million of premium growth for our marine product. Additionally, some competitors have reduced their appetite for select Hawaii homeowner coverages, which, along with rate increases that became effective during the fourth quarter, has allowed our other property premium to grow.
Gross premiums written for the surety segment were up $14 million in 2024 and we continue to invest in infrastructure to support long-term growth. Contract surety benefited from new agency relationships, new construction projects and elevated material costs, while transactional surety grew organically by leveraging existing relationships from complementary products. Despite a highly competitive commercial surety market, the expansion of existing accounts and new business also allowed for premium growth. Industry loss ratios have increased, particularly in the contract surety space. However, our underwriters monitor the financial condition of principals and partner with them to support achievable projects, which has helped us avoid material losses in the past. We believe this collaborative approach will help us write profitable business going forward.
Underwriting income for the casualty segment was $18 million on a 97.9 combined ratio in 2024, compared to $59 million on a 92.2 combined ratio in 2023. The decline was the result of decreased favorable development on prior accident years’ reserves and an increase in current accident year losses, primarily on auto related exposures.
FavorableUnderwriting developmentincome for the casualty segment was $16 million on priora accident98.3 years’combined lossratio reservesin contributed2025, compared to underwriting$18 earningsmillion on a 97.9 combined ratio in each of the past two years.2024. The total benefit from favorable development on prior years’ reserves was $53$33 million for 2024,2025, which was largely attributable to accident years 2019 through 2023.2022 and 2024. Favorable development was widespread, with notable amounts from commercial excess, general liability, executive products, professional services and our mortgage reinsurance program within other casualty. Commercial transportation and small commercial experienced adverse prior accident year development, largely related to auto exposures.development. Comparatively, results for the casualty segment in 20232024 included favorable development of $78$53 million, with the majority attributable to commercial excess, general liability, personal umbrella, executive products andproducts, professional services and our mortgage reinsurance program across accident years 20152019 through 2022.2023. Hurricane and storm losses on casualty-oriented package policies that include property coverage resulted in $5$2 million of losses in 2024,2025, compared to $2$5 million of storm losses in 2023.2024.
The segment’s loss ratio was 61.562.4 in 2024,2025, compared to 55.161.5 in 2023.2024. The higher loss ratio in 20242025 was due to lower amounts of favorable development on prior years’ reserves and strengthening our current accident year reserves for our personal umbrella, transportation and professional services products.reserves. The expense ratio for the casualty segment was 35.9 in 2025, compared to 36.4 in 2024, comparedas tothe 37.1growth in 2023.the earned premium base exceeded the growth in expense.
Underwriting income from the property segment was $219 million on a 57.2 combined ratio in 2025, compared to $168 million on a 68.5 combined ratio in 2024, compared to $86 million on a 78.5 combined ratio in 2023.2024. Underwriting results for 2025 included $50 million of favorable development on prior years’ attritional and catastrophe loss reserves, largely from the commercial property and marine businesses, as well as $28 million of storm and other catastrophe losses. Results for 2024 included $33 million of favorable development on prior years’ attritional and catastrophe loss reserves, largely from the marine and commercial property businesses; $73 million of losses from Hurricanes Beryl, Helene and Milton; as well as $28 million of other storm losses. Results for 2023 included $21 million of favorable development on prior years’ loss and catastrophe reserves, primarily from the commercial property business; $49 million of losses and $12 million of reinsurance reinstatement premium from Hawaiian wildfires; as well as $29 million of other storm losses.
The segment’s loss ratio was 23.4 in 2025, compared to 37.4 in 2024. Catastrophe losses added 5 points to the loss ratio in 2025, compared to 19 points in 2024. Additionally, increased levels of favorable development on prior accident years improved the loss ratio in 2025, but the impact was partially offset by higher levels of current accident year attritional losses. The expense ratio for the property segment increased to 33.8 in 2025, from 31.1 in 2024, as a result of continued investments in people and technology, as well as higher acquisition-related expenses, which can fluctuate between periods.
A larger earned premium base resulted in higher levels of underwriting income as well as a lower expense ratio. The segment’s loss ratio was 37.4 in 2024, compared to 42.9 in 2023. Catastrophe losses added 19 points to the loss ratio in 2024, compared to 20 points of impact in 2023. Additionally, the current accident year attritional loss ratio improved in 2024. The expense ratio for the property segment declined to 31.1 in 2024, from 35.6 in 2023, as the growth in the earned premium base exceeded the growth in expense. Furthermore, the expense ratio benefited from an increase in fee income, which was the result of producing more premium for our syndicated partner.
Underwriting income for the surety segment totaled $29 million on an 80.3 combined ratio in 2025, compared to $25 million on an 82.2 combined ratio in 2024, compared to $27 million on a 79.6 combined ratio in 2023.2024. Underwriting performance for each year reflects a combination of positive current accident year results and favorable development in prior accident years’ loss reserves. Favorable development on prior accident years’ reserves decreased loss and settlement expenses for the segment by $16 million for 2025 and $9 million for 2024 and 2023.2024.
The segment’s loss ratio was 11.27.2 in 2024,2025, compared to 10.711.2 in 2023.2024. An increase in the currentprior accident year lossfavorable ratiodevelopment led to the slightly higher overallimproved loss ratio for the segment. The expense ratio for the surety segment was 73.1 in 2025, up from 71.0 in 2024, up from 68.9 in 2023, due to increasescontinued investments in selectpeople policyand acquisition costs,technology, as well as continuedhigher investmentspolicy inacquisition technology and people to support growth and improve the customer experience.expenses.
During 2024,2025, net investment income increased by 1812 percent. The increase was primarily due to higher interestreinvestment rates and an increased asset base relative to the prior year. The average annual yields on our investments were as follows for 20242025 and 20232024:
In 2025, we recognized $61 million of net realized gains in the equity portfolio, less than $1 million of net realized gains in the fixed income portfolio and $4 million of other net realized gains. In 2024, we recognized $31 million of net realized gains in the equity portfolio, $5 million of net realized losses in the fixed income portfolio and $6 million of other net realized losses.
While the Federal Reserve began reducing rates in 2025, yields remained attractive relative to recent history, which supported investment income throughout the year. Entering 2026, the Federal Reserve has emphasized that further policy moves will be data-dependent, with projections and market pricing suggesting a measured easing path. A stable rate environment and larger invested asset base should support continued growth in investment income, though a sharper-than-expected decline in yields would limit the pace of that growth.
In 2024, we recognized $31 million of net realized gains in the equity portfolio, $5 million of net realized losses in the fixed income portfolio and $6 million of other net realized losses. In 2023, we recognized $22 million of net realized gains in the equity portfolio, $3 million of net realized losses in the fixed income portfolio and $14 million of other net realized gains, primarily from the payout of the working capital escrow associated with our sale of Maui Jim.
Investment income was aided by higher interest rates in 2024, as the Federal Reserve kept the Fed Funds target high relative to recent history. Entering 2025, consensus is the Federal Reserve’s current policy will continue balancing price stability against maximum employment, and result in two to three rate cuts over the coming year. A stable interest rate environment and a larger invested asset base should offer continued investment income growth. However, if yields decline dramatically from current levels, investment income growth may be limited.
An ABS, CMBS or non-agency residential mortgage-backed security (RMBS) is a securitization collateralized by the cash flows from a specific pool of underlying assets. These asset pools can include items such as credit card payments, auto loans, structured bank loans in the form of collateralized loan obligations (CLOs) and residential or commercial mortgages. As of December 31, 2024,2025, ABS/CMBS/RMBS investments were 1319 percent of the fixed income portfolio, compared to 1013 percent as of December 31, 2023.2024. Fifty-fiveSixty-eight percent of the securities in the ABS/CMBS/RMBS portfolio were rated AAA as of December 31, 2024,2025, while 8593 percent were rated A or better. We believe that ABS/CMBS investments often add superior cash flow stability over mortgage pass-throughs or CMOs.
Ninety-threeNinety-two percent of our municipal fixed income securities were rated AA or better, while 99100 percent were rated A or better. The municipal portfolio includes 6673 percent taxable and 3427 percent tax-exempt securities.
As of December 31, 2024,2025, our corporate debt portfolio comprised 42 percent of the fixed income portfolio, comparedconsistent towith 43its 42 percent weight as of December 31, 2023.2024. The corporate allocation includes floating rate bank loans and bonds that are below investment grade in credit quality and offer incremental yield over our core fixed income portfolio. Non-investment grade bonds totaled $148$158 million while non-rated Regulationprivate Dplacement securities totaled $90$108 million at the end of 2024.2025. WhileAlthough these Regulationprivate Dplacement securities are not rated by a traditional nationally recognized statistical rating organization, all but one carry an equivalent investment-grade rating from the Securities Valuation Office of the NAIC. The corporate debt portfolio has an overall quality rating of A- diversified among 954981 issues.
The table below illustrates our corporate debt exposure as of December 31, 2024.2025. Private placements include banksecurities loanacquired through private offerings (e.g., Regulation D, Section 4(a)(2) and Regulationsimilar D securities.exemptions).
We incurred $6$5 million of interest expense on outstanding debt during 20242025 and $7$6 million in 2023.2024. AtOn December 31, 2024,2025, our debt included $50 million from our revolving line of credit with PNC Bank, N.A. (PNC). The borrowing may be repaid at any time and carries an adjustable interest rate of 5.985.33 percent as of the end of 2024.2025. Additionally, we borrowed $50 million from the Federal Home Loan Bank of Chicago (FHLBC) that matures on November 12, 2025 and payspay interest monthly at an annualized rate of 4.444.21 percent. This borrowing matures on November 12, 2026, but may be repaid early at set quarterly dates. Comparatively, aton December 31, 2023,2024, our debt consisted of $50 million from our revolving line of credit with PNC and carried a floating interest rate of 7.075.98 percent, as well as $50 million of borrowings from the FHLBC that matured on November 10, 20242025 and paid interest monthly at an annualized rate of 5.444.44 percent.
We incurred $16$17 million of general corporate expense during 20242025 and 2023.$16 million during 2024. General corporate expenses include director and shareholder relation costs and other compensation-related expenses incurred for the benefit of the corporation.
As of December 31, 2024,2025, we had a 23 percent interest in the equity and earnings of Prime Holdings Insurance Services, Inc. (Prime). Prime writes business through two Illinois domiciled insurance carriers, Prime Insurance Company, an excess and surplus lines company, and Prime Property and Casualty Insurance Inc., an admitted insurance company. As a private company, the market for Prime’s stock is limited. While we have certain rights under our shareholder agreement and maintain a position on Prime’s board of directors, we are subject to the decisions of the controlling shareholder, which may impact the value of our investment. In 2024, we recorded $5 million in investee losses for Prime, compared to $10 million of investee earnings in 2023. The loss in 2024 is reflective of Prime strengthening loss reserves on a number of prior accident years. Additionally, we maintain a quota share reinsurance treaty with Prime, which contributed $9 million of gross premiums written and $8 million of net premiums earned during 2024, compared to $7 million of gross premiums written and $13 million of net premiums earned during 2023. The decrease in premiums earned is attributable to a reduction of our participation in the quota share reinsurance treaty, as well as the competitive market in which Prime operates.
In 2025, we recorded $4 million in investee losses for Prime, compared to $5 million of investee losses in 2024. We perform annual impairment reviews of our investments in unconsolidated investees. During 2025, continued difficult trends for commercial auto exposures, including industry wide increases in loss costs and adverse development, resulted in a $10 million non-cash impairment charge, which was recognized in equity in earnings of unconsolidated investees. The loss in 2024 was reflective of Prime strengthening loss reserves on a number of prior accident years. Additionally, we had a quota share reinsurance treaty with Prime, which contributed $3 million of gross premiums written and $6 million of net premiums earned during 2025, compared to $9 million of gross premiums written and $8 million of net premiums earned during 2024. The decrease in premiums earned is attributable to a reduction of our participation in the quota share reinsurance treaty, as well as the competitive market in which Prime operates. Beginning in 2026, we will no longer be a participant on Prime’s reinsurance treaty.
Our effective tax rates were 19.120.3 percent and 19.319.1 percent for 20242025 and 2023,2024, respectively. Effective rates are dependent upon components of pretax earnings, which is impacted by the volatility of unrealized gains and losses in equity securities,earnings and the related tax effects. The effective rate was slightly lowerhigher in 20242025 due to higherlower levels of tax-favored adjustments, such as excess tax benefits on share-based compensation.compensation, and higher levels of pretax earnings, which decreased the percentage impact of the tax-favored adjustments.
Dividends paid to our ESOP result in a tax deduction. Dividends paid to the ESOP in 2024 and 2023 resulted in tax benefits of $3 million and $2 million, respectively. These tax benefits reduced the effective tax rate for 2024 and 2023 by 0.6 percent and 0.4 percent, respectively.
Loss and settlement expense reserves represent our best estimate of the ultimate cost of settling reported and unreported claims and related expenses. As discussed previously, the estimation of loss and loss expense reserves is based on various complex and subjective judgments. Actual losses and settlement expenses paid may deviate, perhaps substantially, from the reserve estimates reflected in our financial statements. Similarly, the timing for payment of our estimated losses is not fixed and is not determinable on an individual or aggregate basis. The assumptions used in estimating the payments due by periods are based on our historical claims payment experience. Due to the uncertainty inherent in the process of estimating the timing of such payments, there is a risk that the amounts paid in any period cancould be significantly different than the amounts disclosed above. Amounts disclosed above are gross of anticipated amounts recoverable from reinsurers. Reinsurance balances recoverable on unpaid loss and settlement reserves are reported separately as assets, instead of being netted with the related liabilities, since reinsurance does not discharge the Company of its liability to policyholders. Reinsurance balances recoverable on unpaid loss and settlement reserves totaled $755$747 million aton December 31, 2024,2025, compared to $757$755 million in 2023.2024.
The next largest contractual obligation relates to debt outstanding. On September 15, 2023, we accessed $50 million from our revolving line of credit with PNC Bank, N.A. (PNC). As theThe borrowing may be repaid at any time prior to the facilities expiration on May 29, 2026 and carriescarried an adjustable interest rate of 5.985.33 percent as of the end of 2024, interest on this $50 million borrowing is excluded from the table above.2025. Additionally, on November 12, 20242025 we borrowed $50 million from the FHLBC.FHLBC and pay interest monthly at an annualized rate of 4.21 percent. The borrowing matures on November 12, 20252026, andbut monthlymay interestbe isrepaid paidearly at anset annualizedquarterly rate of 4.44 percent.dates. We are not party to any off-balance sheet arrangements. See note 3 to the consolidated financial statements within Item 8, Financial Statements and Supplementary Data for more information on our debt. Additionally, see note 2 to the consolidated financial statements within Item 8, Financial Statements and Supplementary Data for information on our obligations for other invested assets.
AtOn December 31, 2024,2025, we had cash, short-term investments and other investments maturing within one year of approximately $372$414 million and an additional $739$752 million of investments maturing between 1 to 5 years. Our revolving line of credit with PNC permits us to borrow up to an aggregate principal amount of $100 million, but may be increased up to an aggregate principal amount of $130 million under certain conditions. The facility has a three-year term that expires on May 29, 2026. As of December 31, 2024,2025, $50 million was outstanding on this facility. Additionally, based on qualifying assets and the $50 million borrowing outstanding with the FHLBC as of year-end, additional immediate borrowing capacity from the FHBLCFHLBC is approximately $15 million. However, under certain circumstances, that capacity may be increased based on additional FHLBC stock purchased and available collateral. Our membership allows each insurance subsidiary member to determine tenor and structure at the time of borrowing.
OurPremiums received from customers are our largest source of cash is from premiums received from our customers,cash, which we receive at the beginning of the coverage period for most policies. Our largest cash outflow is for claimsclaim payments that arise when a policyholder incurs an insured loss. Because the payment of claims occurs after the receipt of the premium, often years later, we invest the cash in various investment securities that earn interest and dividends. We use cash to pay commissions to brokers and agents, as well as to pay for ongoing operating expenses such as salaries, rent, taxes and interest expense. We also utilize reinsurance to manage the risk that we take on our policies. We cede, or pay out, part of the premiums we receive to our reinsurers and collect cash back when losses subject to our reinsurance coverage are paid.
We maintain a diversified investment portfolio representing policyholder funds that have not yet been paid out as claims, as well as the capital we hold for our shareholders. As of December 31, 2024,2025, our portfolio had a carrying value of $4.1$4.7 billion. Portfolio assets aton December 31, 20242025 increased by $408$579 million, or 1114 percent, from December 31, 2023.2024.
At the holding company (RLI Corp.) level, we rely largely on dividends from our insurance company subsidiaries to meet our obligations for paying principal and interest on outstanding debt, corporate expenses and dividends to RLI Corp. shareholders. As discussed further below, dividend payments to RLI Corp. from our principal insurance subsidiary are restricted by state insurance laws as to the amount that may be paid without prior approval of the insurance regulatory authorities of Illinois. As a result, we may not be able to receive dividends from such subsidiary at times and in amounts necessary to pay desired dividends to RLI Corp. shareholders. On a GAAP basis, as of December 31, 2024,2025, our holding company had $1.5$1.8 billion in equity. This includes amounts related to the equity of our insurance subsidiaries, which is subject to regulatory restrictions under state insurance laws. The unrestricted portion of holding company net assets is comprised primarily of investments and cash, including $39$72 million in liquid investment assets, which approximates two-thirds ofexceeds our normal annual holding company expenditures. Unrestricted funds at the holding company level are available to fund debt interest, general corporate obligations and regular dividend payments to our shareholders. If necessary, the holding company also has other potential sources of liquidity that could provide for additional funding to meet corporate obligations or pay shareholder dividends, which include a revolving line of credit, as well as access to the capital markets.
Ordinary dividends, which may be paid by our principal insurance subsidiary without prior regulatory approval, are subject to certain limitations based upon statutory income, surplus and earned surplus. The maximum ordinary dividend distribution from our principal insurance subsidiary in a rolling 12-month period is limited by Illinois law to the greater of 10 percent of RLI Ins. policyholder surplus, as of December 31 of the preceding year, or the net income of RLI Ins. for the 12-month period ending December 31 of the preceding year. Ordinary dividends are further restricted by the requirement that they be paid from earned surplus. In 2024 and 2023, RLI Ins. paid ordinary dividends totaling $152 million and $145 million, respectively, to RLI Corp. Any dividend distribution in excess of the ordinary dividend limits is deemed extraordinary and requires prior approval from the IDOI. No extraordinary dividends were paid in 2024 or 2023. Although RLI Ins. was restricted from distributing ordinary dividends to RLI Corp. as of December 31, 2024, the rolling 12-month limitations reset as of January 1st. A total of $241 million in ordinary dividend capacity will be available over the course of 2025. In addition to restrictions from our principal subsidiary’s insurance regulator, we also consider internal models and how capital adequacy is defined by our rating agencies in determining amounts available for distribution.
In 2025 and 2024, RLI Ins. paid ordinary dividends totaling $139 million and $152 million, respectively, to RLI Corp. Any dividend distribution in excess of the ordinary dividend limits is deemed extraordinary and requires prior approval from the IDOI. In 2025, our principal insurance subsidiary sought and received regulatory approval prior to the payment of extraordinary dividends totaling $151 million. No extraordinary dividends were paid in 2024. As of January 1, 2026, $19 million of the net assets of our principal insurance subsidiary were not restricted and could be distributed to RLI Corp. as ordinary dividends. A total of $309 million in ordinary dividend capacity will be available over the course of 2026. In addition to restrictions from our principal subsidiary’s insurance regulator, we also consider internal models and how capital adequacy is defined by our rating agencies in determining amounts available for distribution.
Our 195th199th consecutive dividend payment was declared in February 20252026 and will be paid on March 20,16, 2025,2026, in the amount of $0.15$0.16 per share. Since the inception of cash dividends in 1976, we have increased our annual ordinary dividend every year.
What changed in the latest 10-Q
Risk Factors
We could not find a separate Risk Factors item in the latest 10-Q. Some companies leave it out of quarterly reports; see the annual 10-K risk factors and the original filing. Open the filing on SEC.gov.
Management's Discussion & Analysis (MD&A)
New heading “Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025”
New heading “Underwriting Income”
New heading “Investment Income”
Largest changes
“Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025”see in full comparison
“Gross premiums written for the casualty segment increased $32 million in the second quarter of 2026. We continued to benefit from favorable rate movement across a large portion of our casualty segment. Personal umbrella expanded its distribution base while benefiting from favorable rate movement. Our commercial transportation business benefited from favorable market conditions as some competitors reduced their appetite, creating opportunities to write additional high-quality business at adequate rates. …”see in full comparison
“Comprehensive earnings totaled $166 million for the second quarter of 2026, compared to $143 million for the same period in 2025. Other comprehensive earnings (loss) primarily included net after-tax unrealized gains (losses) from the fixed income portfolio. Other comprehensive loss of $2 million in the second quarter of 2026 was primarily attributable to rising interest rates, which decreased the fair value of securities held in the fixed income portfolio. Comparatively, $19 million of other comprehensive earnings was recognized in 2025.”see in full comparison
“Gross premiums written for the property segment decreased $13 million in the second quarter of 2026. Commercial property premiums declined $17 million as increased market capacity and competition continued to pressure pricing. Marine premiums increased $3 million, driven primarily by continued growth in our inland marine products. Additionally, growth in other property premiums was driven by rate increases for our Hawaii homeowners business.”see in full comparison
Full comparison: every changed paragraph (68)
Forward lookingForward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 appear throughout this report. These forward lookingforward-looking statements generally include words such as “expect,” “predict,” “estimate,” “will,” “should,” “anticipate,” “believe” and similar expressions. Such assumptions are, in turn, based on information available and internal estimates and analyses of general economic conditions, competitive factors, conditions specific to the property and casualty insurance, reinsurance and surety industries, claims development and the impact thereof on our loss reserves, the adequacy and financial security of our reinsurance programs, developments in the securities market and the impact on our investment portfolio, regulatory changes and conditions and other factors. These assumptions are subject to various risks, uncertainties and other factors, including, without limitation those set forth in “Item 1A. Risk Factors” within the Annual Report on Form 10-K for the year ended December 31, 2025 and Part II within this report. Actual results could differ materially from those expressed in, or implied by, these forward lookingforward-looking statements. Forward lookingForward-looking statements reflect the Company’s expectations, plans or forecasts of future events and views as of the date of this report. While the Company may elect to update these forward lookingforward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so. You should review the various risks, uncertainties and other factors listed from time to time in our Securities and Exchange Commission filings.
ThreeSix Months Ended MarchJune 31,30, 2026 Compared to ThreeSix Months Ended MarchJune 31,30, 2025
Net premiums earned increased 34 percent, driven primarily by products in our casualty segment. Investment income was up 1516 percent, reflecting higher reinvestment rates and an increased average asset base and higher reinvestment rates.base. Market declinesincreases resulted in $39$64 million of unrealized lossesgains on equity securities induring the first threesix months of 2026, compared to $42$1 million of unrealized losses forin the same period inof 2025. Realized gains in 2026 included $10$20 million of realized gains on equity securities, primarily due to rebalancing within our equity strategies, and less than $1 million of realized losses on fixed income securities. This compares to $15$29 million of realized gains on equity securities and less thansecurities, $1 million of realized losses on fixed income securities and $2 million of other realized gains during the first threesix months of 2025.
Underwriting income was $58$118 million on an 86.085.8 combined ratio for the first threesix months of 2026, compared to $71$133 million on an 82.383.4 combined ratio in the same period of 2025. Underwriting results for 2026 were impacted by $16$26 million of pretax catastrophe losses, compared to $12 millionlosses in both 2026 and 2025. Results for each period benefited from favorable development on prior years’ loss reserves, which provided additional pretax earnings of $35$75 million in the first threesix months of 2026, compared to $31$59 million in 2025.
The loss ratio was 47.046.2 for the first threesix months of 2026, compared to 44.545.2 in 2025. The benefit of higher levels ofgreater favorable development on prior years’ loss reserves was offset by higher catastrophe losses and a shift in the mix of business towards casualty lines, which tend to have higher non-catastrophe loss ratios than our property and surety products. The expense ratio increased to 39.039.6 from 37.8.38.2. IncreasedThe expenses wereincrease primarily related toreflected continued investments in peopleour and technology.workforce.
Equity in earnings of unconsolidated investees relates to our investment in Prime Holdings Insurance Services, Inc. (Prime), a specialty insurance company. We recognized $2$5 million of investee earnings from Prime in the first threesix months of 2026, comparedthe tosame $3 millionas in the first six months of 2025.
Net earnings for the first threesix months of 2026 totaled $55$223 million, compared to $63$188 million for the same period in 2025. The decreaseincrease wasprimarily duereflected tolarger lowerunrealized levelsgains ofon underwritingequity income,securities partially offset byand higher investment income.
Comprehensive earnings totaled $30$195 million for the first threesix months of 2026, compared to $93$236 million for the first threesix months of 2025. Other comprehensive earnings (loss) primarily included net after-tax unrealized gains (losses) from the fixed income portfolio. Other comprehensive loss of $25$28 million in the first threesix months of 2026 was primarily attributable to rising interest rates, which decreased the fair value of securities held in the fixed income portfolio. Comparatively, $30$49 million of other comprehensive earnings was recognized in 2025.
Gross premiums written increased $13$30 million for the first threesix months of 2026, driven by favorable rate movement and growth within our casualty segment and reflecting favorable rate movement.segment. Net premiums earned increased $13$28 million, alsoprimarily drivendue byto continued growth within our casualty segment and consistent with the growth in gross premiums written.segment.
Gross premiums written for the casualty segment increased $29$61 million in the first threesix months of 2026. We continued to benefit from positive rate movement across a large portion of our casualty segment. Personal umbrella continued expansion ofexpanded its distribution base,base while ourachieving favorable rate increases. Our commercial transportation business benefited from favorable market conditions as some othercompetitors carriers reducingreduced their appetite.appetite, creating opportunities to write additional high-quality business at adequate rates. The decline in general liability premiumpremiums wasresulted the result offrom slower construction activity within our targeted market for the year,markets, which created a more challenging environment tofor write business onwriting new projects.project business. Other casualty premiumpremiums declined due to increased competition in our binding authority groupbusiness and our decision to no longer participate in the reinsurance agreement with Prime.
Gross premiums written for the property segment decreased $15$28 million in the first threesix months of 2026. Commercial property declined $18$36 million as moreincreased intensemarket capacity and competition drovecontinued downto rates.pressure However,pricing. Marine premiums increased $5 million, driven by strong new productbusiness adjacenciesproduction ledand to $2 million of premiumcontinued growth forin our inland marine product.products. Additionally, growth in other property premiums was driven by rate increases and ongoing efforts to enhance client experience to attract and retain business for our Hawaii homeowners coverages.business and new business opportunities.
Gross premiums written for the surety segment decreased by $3 million in the first six months of 2026. Contract surety remained relatively stable despite economic conditions that tempered construction activity, reflecting continued marketing efforts and disciplined underwriting. Commercial surety premiums declined due to lower levels of non-recurring premium from our renewable energy portfolio and a competitive marketplace that resulted in fewer new business opportunities.
Gross premiums written for the surety segment decreased by less than $1 million in the first three months of 2026. Transactional and contract surety grew as a result of continued marketing efforts. However, slowdowns in various sectors led to declines in commercial surety.
The casualty segment recorded underwriting income of $7$9 million in the first threesix months of 2026, compared to $2$10 million for the same period last year. Prior accident years’ reserve releases reduced loss and settlement expenses for the casualty segment by $14$28 million in 2026, primarily related to accident years 2018,2019 2019,through 2021,2022, 2022as well as 2024 and 2025. Larger drivers of the favorable development were commercial transportation, executive products, professional services and commercial transportation,excess, while personal umbrella experienced some adverse development. In comparison, $5$20 million of prior accident years’ reserves were released in the first threesix months of 2025. Commercial excess, general liability and subsegments within professional liability drove the favorable development, while commercial transportation and personal umbrella had adverse development related to auto exposures in 2025. Storm losses on casualty-oriented package policies that include property coverage resulted in $2 million of losses in both 2026 and less than $1 million in 2025.
The combined ratio for the casualty segment was 97.198.2 in 2026, compared to 99.197.8 in 2025. The segment’s loss ratio was 61.561.8 in 2026, down from 63.761.9 in 2025, primarily due to higher levels of favorable prior accident years’ reserve development.2025. The expense ratio for the casualty segment was 35.6,36.4, up from 35.435.9 for the same period last year.
The property segment recorded underwriting income of $48$102 million for the first threesix months of 2026, compared to $57$106 million for the same period last year. Underwriting results for 2026 included $21$44 million of favorable development on prior years’ loss and catastrophe reserves, offset by $14$24 million of storm losses. Comparatively, results for 2025 included $18$28 million of favorable development on prior years’ loss and catastrophe reserves and $12$24 million of storm and other catastrophe losses.
Underwriting results for the first threesix months of 2026 resulted in a combined ratio of 61.9,59.4, compared to 57.159.6 for the same period last year. The segment’s loss ratio was 26.824.2 in 2026, updown from 24.727.0 in 2025, asdue larger catastrophe losses and slightly higher attritional, non-catastrophe losses on a lower earned premium base were partially offset byto increased favorable development on prior accident years. The segment’s expense ratio increased to 35.135.2 in 2026 from 32.432.6 in the prior year, as a result of continued investments in people and technology on a lower earned premium base.
The surety segment recorded underwriting income of $2$7 million for the first threesix months of 2026, compared to $12$16 million for the same period last year. Results for 2026 included favorable development on prior accident years’ reserves, which decreased loss and settlement expenses for the segment by less than $1$4 million, compared to $8$11 million in 2025.
The combined ratio for the surety segment totaled 93.790.4 for the first threesix months of 2026, compared to 68.578.2 for the same period last year. The segment’s loss ratio was 18.013.8 in 2026, up from (3.6)4.8 in 2025, due to lower levels of favorable prior accident years’ reserve development. The expense ratio was 75.7,76.6, up from 72.173.4 in the prior year, due to continued investments in people and technology,people, as well as higher acquisition expenses, which can fluctuate between periods.
Our investment portfolio generated net investment income of $42$88 million during the first threesix months of 2026, an increase of 1516 percent from the same period in 2025. The increase in investment income was due to higher reinvestment rates, as well as an increased average asset base relative to the prior year.
Yields on our fixed income investments for the first threesix months of 2026 and 2025 were as follows:
The following table depicts the composition of our investment portfolio at MarchJune 31,30, 2026 as compared to December 31, 2025:
The fixed income portfolio decreasedincreased by $5$85 million in the first threesix months of 2026, as interestthe ratesmajority increasedof causinginvestment cash flows were directed to the fairfixed valueincome of bonds to decline.portfolio. Average fixed income duration was 4.7 years at MarchJune 31,30, 2026, reflecting our liability structure and sound capital position. The equity portfolio decreasedincreased by $34$61 million during the first threesix months of 2026, due to negativepositive performance in the equity markets.markets, primarily in the second quarter. Proceeds from debt issuance were invested into short-term securities, increasing the short-term investment portfolio by $266$86 million.
Our effective tax rate for the first threesix months of 2026 was 18.519.8 percent, compared to 19.620.2 percent for the same period in 2025. Effective rates are dependent upon components of pretax earnings or losses and the related tax effects. The decrease in the effective tax rate for the three-monthsix-month period in 2026 was primarily due to higher levels of tax credit utilization.utilization and deductions related to the $2.00 special dividend paid to our Employee Stock Ownership Plan.
Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025
Net premiums earned increased 4 percent, driven primarily by products in our casualty segment. Investment income was up 17 percent, reflecting higher reinvestment rates and an increased average asset base. Market increases resulted in $103 million of unrealized gains on equity securities in the second quarter of 2026, compared to $44 million of unrealized gains for the same period in 2025. Realized gains in 2026 included $10 million of realized gains on equity securities, primarily due to rebalancing within our equity strategies, and less than $1 million of realized losses on fixed income securities. This compares to $14 million of realized gains on equity securities, $1 million of realized losses on fixed income securities and $2 million of other realized gains during the second quarter of 2025.
Underwriting income was $60 million on an 85.6 combined ratio for the second quarter of 2026, compared to $62 million on an 84.5 combined ratio in the same period of 2025. Underwriting results for 2026 were impacted by $10 million of pretax catastrophe losses, compared to $14 million in 2025. Results for each period benefited from favorable development on prior years’ loss reserves, which provided additional pretax earnings of $40 million in the second quarter of 2026, compared to $28 million in 2025.
The loss ratio was 45.5 for the second quarter of 2026, down from 45.9 in 2025 due to higher levels of favorable development on prior years’ loss reserves and lower catastrophe losses. The expense ratio increased to 40.1 from 38.6. Increased expenses were primarily related to continued investments in our workforce, as well as higher acquisition-related costs, which can fluctuate between periods.
Bonus and profit-sharing amounts earned by executives, managers and associates are predominantly influenced by corporate performance, including operating earnings, combined ratio and return on capital. Favorable development and other drivers of growth in book value will increase bonus and profit-sharing expenses, while catastrophe losses, adverse development and decreased investment portfolio returns would lead to expense reductions. These performance-related expenses affect policy acquisition, insurance operating and general corporate expenses.
Equity in earnings of unconsolidated investees relates to our investment in Prime Holdings Insurance Services, Inc. (Prime), a specialty insurance company. We recognized $3 million of investee earnings from Prime in the second quarter of 2026, the same as in the second quarter of 2025.
Net earnings for the second quarter of 2026 totaled $168 million, compared to $124 million for the same period in 2025. The increase primarily reflected larger unrealized gains on equity securities and higher investment income.
Comprehensive earnings totaled $166 million for the second quarter of 2026, compared to $143 million for the same period in 2025. Other comprehensive earnings (loss) primarily included net after-tax unrealized gains (losses) from the fixed income portfolio. Other comprehensive loss of $2 million in the second quarter of 2026 was primarily attributable to rising interest rates, which decreased the fair value of securities held in the fixed income portfolio. Comparatively, $19 million of other comprehensive earnings was recognized in 2025.
Premiums
Gross premiums written increased $17 million for the second quarter of 2026, driven by favorable rate movement and growth within our casualty segment. Net premiums earned increased $15 million, primarily due to continued growth within our casualty segment.
Gross premiums written for the casualty segment increased $32 million in the second quarter of 2026. We continued to benefit from favorable rate movement across a large portion of our casualty segment. Personal umbrella expanded its distribution base while benefiting from favorable rate movement. Our commercial transportation business benefited from favorable market conditions as some competitors reduced their appetite, creating opportunities to write additional high-quality business at adequate rates. The decline in general liability premiums resulted from slower construction activity within our targeted markets, which created a more challenging environment for writing new project business. Other casualty premiums declined due to increased competition in our binding authority business.
Gross premiums written for the property segment decreased $13 million in the second quarter of 2026. Commercial property premiums declined $17 million as increased market capacity and competition continued to pressure pricing. Marine premiums increased $3 million, driven primarily by continued growth in our inland marine products. Additionally, growth in other property premiums was driven by rate increases for our Hawaii homeowners business.
Gross premiums written for the surety segment decreased by $2 million in the second quarter of 2026. Transactional and contract surety remained relatively stable despite economic conditions that tempered construction activity. Commercial surety premiums declined due to lower levels of non-recurring premium from our renewable energy portfolio and fewer new business opportunities.
Underwriting Income
The casualty segment recorded underwriting income of $2 million in the second quarter of 2026, compared to $8 million for the same period last year. Prior accident years’ reserve releases reduced loss and settlement expenses for the casualty segment by $13 million in 2026, primarily related to accident years 2020, 2021, 2024 and 2025. Larger drivers of the favorable development were commercial excess, commercial transportation, professional services and executive products, while personal umbrella experienced some adverse development. In comparison, $15 million of prior accident years’ reserves were released in the second quarter of 2025. Commercial excess, personal umbrella, general liability and subsegments within professional liability drove the favorable development. Storm losses on casualty-oriented package policies that include property coverage resulted in $1 million of losses in both 2026 and 2025.
The combined ratio for the casualty segment was 99.3 in 2026, compared to 96.5 in 2025. The segment’s loss ratio was 62.2 in 2026, up from 60.2 in 2025, primarily due to lower levels of favorable prior accident years’ reserve development. The expense ratio for the casualty segment was 37.1, up from 36.3 for the same period last year.
The property segment recorded underwriting income of $53 million for the second quarter of 2026, compared to $50 million for the same period last year. Underwriting results for 2026 included $23 million of favorable development on prior years’ loss and catastrophe reserves, offset by $9 million of storm losses. Comparatively, results for 2025 included $10 million of favorable development on prior years’ loss and catastrophe reserves and $13 million of storm and other catastrophe losses.
Underwriting results for the second quarter of 2026 resulted in a combined ratio of 56.8, compared to 62.1 for the same period last year. The segment’s loss ratio was 21.6 in 2026, down from 29.4 in 2025, due to larger reserve releases and lower catastrophe losses. The segment’s expense ratio increased to 35.2 in 2026 from 32.7 in the prior year, as a result of continued investments in people on a lower earned premium base.
The surety segment recorded underwriting income of $5 million for the second quarter of 2026, compared to $4 million for the same period last year. Results for 2026 included favorable development on prior accident years’ reserves, which decreased loss and settlement expenses for the segment by $3 million, compared to $2 million in 2025.
The combined ratio for the surety segment totaled 87.2 for the second quarter of 2026, compared to 87.9 for the same period last year. The segment’s loss ratio was 9.6 in 2026, down from 13.3 in 2025, due to larger levels of favorable prior accident years’ reserve development. The expense ratio was 77.6, up from 74.6 in the prior year, due to continued investments in people, as well as higher acquisition expenses, which can fluctuate between periods.
Investment Income
Our investment portfolio generated net investment income of $46 million during the second quarter of 2026, an increase of 17 percent from the same period in 2025. The increase in investment income was due to higher reinvestment rates, as well as an increased average asset base relative to the prior year.
Yields on our fixed income investments for the second quarter of 2026 and 2025 were as follows:
Income Taxes
Our effective tax rate for the second quarter of 2026 was 20.2 percent, compared to 20.6 percent for the same period in 2025. Effective rates are dependent upon components of pretax earnings or losses and the related tax effects. The decrease in the effective tax rate for the second quarter of 2026 was primarily due to deductions related to the $2.00 special dividend paid to our Employee Stock Ownership Plan.
The following table summarizes cash flows provided by (used in) our activities for the three-monthsix-month periods ended MarchJune 31,30, 2026 and 2025:
Premiums received from customers are our largest source of cash, while claim payments on insured losses represent our largest use of cash. Cash flows from operating activities may vary between periods due to the timing of these receipts and payments. Operating cash flowsflow decreased in the first threesix months of 2026 compared to the same period in 2025, primarily due to higher loss and settlement expense payments, the purchase of tax credits applied against federal income taxestax incurred in 2025,credits, and higher bonus and profit-sharing contributions paid in the current period. The increase in incentiveemployee compensation reflects improved financial performance in 2025.payments. These decreases were partially offset by higher gross premium and investment income receipts,receipts as well asand lower reinsurance costs. During 2026, our financing activities included returning $184 million to shareholders through a $2.00 special dividend and repurchasing $12 million of common stock under the $250 million share repurchase plan the Company’s Board of Directors authorized on May 14, 2026.
Outstanding debt totaled $347$297 million as of MarchJune 31,30, 2026, consisting of $297 million of long-term debt, net of unamortized discount and debt issuance costs, and $50 million of short-term debt.2026. On March 3, 2026, we completed a public debt offering, issuing $300 million of senior notes maturing June 1, 2036, with interest payable semi-annually at a rate of 5.375 percent. The notes were issued at a discount, resulting in net proceeds of $297 million after deducting the discountdiscounts and issuance costs.
We repaid $50 million that was outstanding under our revolving credit facility with PNC Bank, N.A. (PNC) on February 20, 2026, which had been drawn in 2023.2026. The credit facility with PNC, which was entered into during the first quarter of 2023, provided borrowing capacity of $100 million and was scheduled to expire on May 29, 2026. On February 26, 2026, we entered into an amended and restated credit agreement with PNC to extend the maturity date to February 26, 2031. The amended agreement provides borrowing capacity of $150 million and may be increased to $200 million under certain conditions.
RLIOn InsuranceMay Company12, also2026, borrowedwe repaid the $50 million borrowed from the Federal Home Loan Bank of Chicago (FHLBC) on November 12, 2025,2025. which replacedWhile the $50 million borrowed in 2024. The borrowing matureswas onoutstanding, Novemberinterest 12, 2026, but may be repaid early at set quarterly dates. Interest iswas paid monthly at an annualized rate of 4.21 percent.
Two of our insurance companies, RLI Insurance Company (RLI Ins.) and Mt. Hawley Insurance Company, are members of the FHLBC. Membership in the Federal Home Loan Bank system provides both companies access to an additional source of liquidity via a secured lending facility. Our membership allows each insurance subsidiary to determine tenor and structure at the time of borrowing. As of MarchJune 31,30, 2026, $52 million of investmentsthere were pledgedno asoutstanding collateralborrowings with the FHLBC to ensure timely access to the secured lending facility.FHLBC.
As of MarchJune 31,30, 2026, we had cash and other investments maturing within one year of approximately $635$424 million and an additional $786$811 million maturing between one to five years. Whereas our strategy is to be fully invested at all times, short-term investments in excess of demand deposit balances are considered a component of investment activities, and thus are classified as investments in our consolidated balance sheets.
We maintain a diversified investment portfolio representing policyholder funds that have not yet been paid out as claims, as well as the capital we hold for our shareholders. Invested assets at MarchJune 31,30, 2026 have increased $226$211 million from December 31, 2025. As of MarchJune 31,30, 2026, our investment portfolio had the following asset allocation breakdown:
Quality is an average of each bond’s credit rating, adjusted for its relative weighting in the portfolio. As of MarchJune 31,30, 2026, our fixed income portfolio had the following rating distribution:
As of MarchJune 31,30, 2026, our fixed income portfolio remained well diversified, with 1,9311,977 individual issues.
Our investment portfolio has limited exposure to structured asset-backed securities. As of MarchJune 31,30, 2026, we had $388$420 million in ABS, which are pools of assets collateralized by cash flows from several types of loans, including home equity, credit cards, autos and structured bank loans in the form of collateralized loan obligations (CLOs).
RLI insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 7 Form 4 filings (4 insiders, 5 trade dates, 21,500 shares, about $1.1M) and open-market sales in 0 filings. Net open-market shares: 21,500 (purchases minus sales); net value about $1.1M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-07-31 | Roberts Debbie Sharell |
Other | 408 | $61.24 | $25.0K |
| 2026-07-31 | Medini Paul Bennett |
Other | 471 | $61.24 | $28.8K |
| 2026-06-01 | Kellogg Clark C |
Open-market purchase | 3,000 | $50.90 | $152.7K |
| 2026-05-28 | Duclos David B. |
Open-market purchase | 2,500 | $51.99 | $130.0K |
| 2026-05-27 | Kliethermes Craig W |
Open-market purchase | 5,000 | $52.00 | $260.0K |
| 2026-05-27 | Kliethermes Craig W |
Open-market purchase | 2,000 | $52.00 | $104.0K |
| 2026-05-27 | Klobnak Jennifer L |
Open-market purchase | 2,000 | $52.72 | $105.4K |
| 2026-05-21 | Kliethermes Craig W |
Open-market purchase | 5,000 | $52.00 | $260.0K |
| 2026-05-19 | Klobnak Jennifer L |
Open-market purchase | 2,000 | $53.42 | $106.8K |
| 2026-05-13 | Kellogg Clark C |
Other | 68 | — | — |
| 2026-05-13 | Kellogg Clark C |
Option exercise | 1,681 | — | — |
| 2026-05-13 | Medini Paul Bennett |
Other | 68 | — | — |
| 2026-05-13 | Medini Paul Bennett |
Option exercise | 1,681 | — | — |
| 2026-05-13 | Fleming Susan S. |
Other | 68 | — | — |
| 2026-05-13 | Fleming Susan S. |
Option exercise | 1,681 | — | — |
| 2026-05-13 | Roberts Debbie Sharell |
Option exercise | 1,681 | — | — |
| 2026-05-13 | Roberts Debbie Sharell |
Other | 68 | — | — |
| 2026-05-13 | Graham Jordan W |
Other | 68 | — | — |
| 2026-05-13 | Graham Jordan W |
Option exercise | 1,681 | — | — |
| 2026-05-13 | Duclos David B. |
Other | 135 | — | — |
| 2026-05-13 | Duclos David B. |
Option exercise | 2,353 | — | — |
| 2026-05-13 | Stone Michael J |
Other | 68 | — | — |
| 2026-05-13 | Stone Michael J |
Option exercise | 1,681 | — | — |
| 2026-05-13 | Restrepo Robert P Jr |
Option exercise | 1,681 | — | — |
| 2026-05-13 | Restrepo Robert P Jr |
Other | 68 | — | — |
| 2026-05-13 | Angelina Michael E |
Other | 68 | — | — |
| 2026-05-13 | Angelina Michael E |
Option exercise | 1,681 | — | — |
| 2026-05-04 | Davis Seth Anthony |
Option exercise | 300 | — | — |
| 2026-05-04 | Davis Seth Anthony |
Shares withheld for tax | 146 | $50.73 | $7.4K |
| 2026-05-04 | Davis Seth Anthony |
Other | 29 | — | — |
| 2026-04-30 | Roberts Debbie Sharell |
Other | 483 | $51.77 | $25.0K |
| 2026-04-30 | Medini Paul Bennett |
Other | 507 | $51.77 | $26.2K |
| 2026-04-30 | Davis Seth Anthony |
Option exercise | 3,000 | $28.07 | $84.2K |
| 2026-04-30 | Davis Seth Anthony |
Shares withheld for tax | 2,236 | $51.77 | $115.8K |
Well-known investors holding RLI (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Markel Group (Tom Gayner) | 2026-06-30 | 2,394,544 | $141.4M | 1.08% | No change |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 916,838 | $53.6M | 0.02% | Added 25% |
| Two Sigma Investments | 2026-06-30 | 606,591 | $35.8M | 0.03% | Reduced 35% |
| Gotham Asset Management (Joel Greenblatt) | 2026-06-30 | 537,759 | $31.8M | 0.07% | Reduced 32% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 453,929 | $26.8M | 0.02% | Added 8% |
| Renaissance Technologies | 2026-06-30 | 71,500 | $4.1M | — | Sold out |
| Millennium Management (Israel Englander) | 2026-06-30 | 39,297 | $2.3M | 0.0% | New position |
| D. E. Shaw & Co. | 2026-06-30 | 9,285 | $529.6K | — | Sold out |