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    RLI
    Earnings call· Mar 2026(Q1 FY26)

    RLI Q1 FY26 earnings call RLI

    Apr 23, 2026 Source

    Executive summary

    RLI Corp. Q1 FY26 — Strong Underwriting Profitability Amidst Competitive Markets

    RLI Corp. delivered solid underwriting profitability in Q1 FY26, marked by an 86% combined ratio and robust investment income growth. While overall premium growth was modest due to competitive pressures in property and a specific surety loss, the casualty segments demonstrated strong expansion. Management emphasizes a disciplined underwriting approach, focusing on risk selection and rate adequacy in a dynamic market, leveraging its expertise and financial strength to navigate evolving conditions.

    Highlights

    4

    • Generated an 86% combined ratio for the quarter, reflecting solid underwriting performance.

    • Net investment income increased 15%, contributing meaningfully to overall results.

    • Casualty segment premium grew 10%, driven by strong performance in personal umbrella (23% growth) and commercial transportation (27% growth).

    • A.M. Best upgraded the RLI Group of companies to A++, recognizing its long track record of financial strength.

    Concerns

    4

    • Overall gross premiums grew only 3%, tempered by catastrophe activity and increased competition.

    • Operating earnings were $0.83 per share, down from $0.89 in the prior year period.

    • Property gross premium declined 9%, largely due to rate decreases in E&S property and competition from the admitted market.

    • Surety's gross premium was down 1% and its combined ratio was impacted by a large contract surety loss from a prior period claim.

    Segment performance

    12
    SegmentRevenueYoYQoQMargin
    Casualty
    Strong contributions from personal umbrella and commercial transportation, both benefiting from rate increases. Outperformed 2025 by 2 points. $2 million of $16 million cat losses attributed to packaged businesses.
    Favorable prior year reserve development: $14.5 million
    		—10%—97% combined ratio
    Property
    Decline largely due to rate decreases in E&S property. Marine and Hawaii homeowners provided offsets. Favorable prior year development offered a 16-point benefit to the segment loss ratio. Cat events up from Q1 2025.
    Favorable prior year reserve development: $20.6 millionCatastrophe events: $14 million
    		—-9%—62 combined ratio
    Surety
    Attributable to limited favorable prior year development compared to a strong release last year. Impacted by one large contract surety loss from a prior period claim. Competitive market, with growth in contract surety at the top end (large infrastructure projects).
    Limited favorable prior year development
    		—-1%—94 combined ratio
    Personal Umbrella
    Led casualty growth, with expected continued rate increases as recent approvals earn into the book. New business growth shifting from hazardous states to the Midwest.
    Rate increase: 16%
    		—23%——
    Commercial Transportation
    Growth driven by rate and new business opportunities with insurers investing in superior risk management. Competitors pulling back in some classes.
    RLI liability rate increases on renewals: 15%New claim counts: down 14% YoYSubmissions: up 15%
    		—27%——
    E&S Casualty
    Slow start to binding business due to economic concerns. Pipeline of construction projects is solid, but delays exist. Appetite limited for auto on excess liability business due to severity concerns.
    New business submissions: up 14%
    		—-4%——
    Package Businesses
    Growth driven primarily by rate, with higher increases related to auto exposure. Focus on architects, engineers, and contractors.
    Premiums: up 5% to 6%Rates: up 5% to 6%
    		————
    Contract Surety
    Growth occurring at the top end of the market, driven by large infrastructure projects. RLI focuses on small to mid-sized contractors.
    		—single-digit growth——
    Commercial Surety
    Renewable energy portfolio portion maturing with fewer new business opportunities due to slowing investments.
    		—small decline——
    E&S Property
    Market capacity remains plentiful, leading to significant rate decreases. Increased competition from the admitted space.
    Rate change on renewal business: down 19% for hurricanesRate change on renewal business: down 16% for earthquakeNew business submissions: up
    		—-16%——
    Marine
    Largest premium quarter since inception. Benefited from favorable reserve releases.
    Submissions and quotes: continue to increase
    		$47 million4%——
    Hawaii Homeowners
    Service-oriented teams identify growth opportunities. Affected by storm events in the quarter.
    Rates: grew 12%
    		—12%——

    Operational metrics

    15
    Operating earnings per share
    $0.83down from $0.89 last year
    Q1 FY26

    Supported by solid underwriting performance and a 15% increase in investment income. Comparables reflect exclusion of unconsolidated investees from operating earnings definition since Q4 2025.

    Underwriting income
    $58 million
    Q1 FY26

    Benefiting from $35.5 million of favorable prior year reserve development, offset by $16 million of catastrophes and a higher underlying combined ratio.

    GAAP net earnings per share
    $0.60down from $0.68 in Q1 FY25
    Q1 FY26

    Largest driver of differential from operating earnings was negative return in equity portfolio and associated $39 million of unrealized losses.

    Effective tax rate
    18.5%
    Q1 FY26

    Significant impact from tax credit purchase activity.

    Fixed income purchase yields
    4.8%approximately 60 basis points above book yield
    Q1 FY26

    Reinvestment opportunities primarily focused on investment-grade fixed income.

    Total return for portfolio
    -0.4%
    Q1 FY26

    Income partially offsetting price declines for both stocks and bonds.

    Book value per share growth
    2%from year-end 2025
    Q1 FY26

    When isolating on comprehensive earnings of $0.32 per share and adjusting for dividends.

    Long-term debt issuance
    $300 million
    Q1 FY26

    Returns leverage profile to historic average.

    Revolving credit facility
    $150 millionupsized
    Q1 FY26

    Replaced prior transaction, providing backstop liquidity.

    Net retention in property
    up 5 points
    Q1 FY26

    Purely reflective of lower reinsurance costs.

    E&S Casualty new business submissions
    up 14%
    Q1 FY26

    Despite slow start to binding business due to economic concerns.

    E&S Property new business submissions
    up
    Q1 FY26

    Winning business has become more challenging due to market capacity and competition.

    Surety bid activity
    increasing
    Q1 FY26

    Not yet translating into meaningful growth in RLI's small to mid-sized contractor focus.

    Executive products rates
    flatfor the quarter
    Q1 FY26

    Market stabilizing after being soft for a couple of years.

    Professional lines growth
    some growth
    Q1 FY26

    In a very competitive environment, with a little bit of rate.

    Industry KPIs

    9
    MetricValueDetails
    Combined ratio86%%
    Capital returns$300 millionUSD
    Catastrophe losses$16 millionUSD
    Book value per share2%%
    Net investment income15%%
    Net premiums written earned3%%
    Renewal rate change pricingdown 19% for hurricanes, down 16% for earthquake%
    Statutory regulatory capitalA++
    Prior year reserve development$35.5 millionUSD

    Risks & headwinds

    9
    Increased competition from broker-owned facilities and MGAsCurrent

    Operating with incentives that are not always aligned with long-term underwriting profitability.

    Mitigation: Picking spots, finding rate adequacy, focusing on producer relationships, adding value to customers, disciplined underwriting.

    Market dislocation and regulatory uncertainty from emergence and rapid adoption of artificial intelligenceCurrent

    null

    Mitigation: Using AI as a tool to put better data in hands of decision-makers, making RLI more responsive and efficient, while keeping human intelligence and judgment at core.

    Higher catastrophe activityQ1 FY26

    $16 million company-wide, $14 million for Property segment

    Mitigation: Normal variability that comes with taking on insurance risk; local claims teams deployed for Hawaii storms to drive stronger relationships and results.

    Negative return in equity portfolioQ1 FY26

    $39 million of unrealized losses

    Mitigation: Primarily focused on putting money to work in investment-grade fixed income.

    Competitive E&S property market with declining ratesQ1 FY26

    E&S property premiums declined 16%; rate change on renewal business down 19% for hurricanes, 16% for earthquake

    Mitigation: Remaining disciplined and patient, waiting for opportunities to return to E&S market; binding accounts priced above technical benchmark pricing; increasing limits offered selectively.

    Ongoing severity of commercial auto liability coverageCurrent

    null

    Mitigation: More limited appetite for auto on excess liability business; disciplined approach to underwriting.

    One large contract surety lossQ1 FY26

    Impacted Surety's bottom line and combined ratio

    Mitigation: Isolated incident, not indicative of change in risk or approach; reserved for worst-case scenario.

    Slowing investments in renewable energy industry impacting commercial suretyCurrent

    Fewer new business opportunities

    Mitigation: Well-positioned with local expertise, producer engagement, and new transactional surety system functionality.

    Slowdown in construction industry impacting E&S CasualtyQ1 FY26

    E&S casualty premium down 4%; slow start to binding business

    Mitigation: New business submissions up, pipeline solid; expecting rebound as economic conditions stabilize.

    What to watch in Q2 FY26

    5

    Construction activity rebound

    going into the rest of the year
    Currentbit slow
    TargetRebound in activity, increased binding of construction projects

    Why it matters

    Construction activity directly impacts E&S Casualty premium growth and binding rates, which were down in Q1.

    I think the start of construction projects has caused. We write a lot of our policies on a project basis. So it's very specific to when that project kicks off. And with the weather improving, we're hoping that we'll see💬 more business buying as those projects do get kicked off here now that we're into the spring.

    Q&A highlights

    7

    How would you classify the competitive environment for GL, especially in construction, compared to previous quarters?

    The GL competitive environment varies by region, with a slowdown in construction in the Northeast due to political environment and weather, but a healthy spring on the West Coast. New business submissions are up, but binding is slow due to delays, with quotes remaining outstanding for 6-12 months.

    “I think our pipeline is full. We've got more close out there. We did have more quotes for the first quarter than we did in last first quarter. It's just a matter of that business binding.”

    asked by Michael Phillips · answered by Jennifer Klobnak

    2 min read7 chapters

    Detailed Narrative

    01

    Underwriting Performance & Combined Ratio

    RLI reported an 86% combined ratio for Q1 FY26, reflecting solid underwriting performance. This included $35.5 million of favorable prior year reserve development, partially offset by $16 million in catastrophe losses and a higher underlying combined ratio. The Property segment achieved a particularly strong 62 combined ratio, benefiting from $20.6 million in favorable prior year development, which offered a 16-point benefit to its loss ratio.

    02

    Casualty Segment Dynamics

    The Casualty segment saw 10% premium growth, with personal umbrella leading the way at 23% growth and commercial transportation up 27%. Personal umbrella rates increased 16%, and new business growth is strategically shifting from hazardous states to the Midwest. Transportation is benefiting from 15% rate increases on renewals and new business opportunities with superior risk management, despite a cautious industry backdrop, and saw new claim counts down 14% YoY.

    03

    Property Segment Headwinds

    Property gross premium declined 9%, primarily due to significant rate decreases in E&S property (down 19% for hurricanes, 16% for earthquake) and increased competition from the admitted space. Management acknowledges the challenging market but maintains discipline, expecting business to eventually flow back to the E&S market. Despite the top-line decline, the segment achieved a 62 combined ratio, aided by reduced reinsurance costs and manageable spring storm losses.

    04

    Surety Segment Challenges

    Surety's gross premium was down 1% in a very competitive market, with limited favorable prior year development compared to a strong release last year, resulting in a 94 combined ratio. The segment was impacted by one large contract surety loss from a prior period claim, which management considers an isolated incident and fully reserved. Growth in contract surety is occurring at the top end of the market, driven by large infrastructure projects, while commercial surety faces fewer new business opportunities due to slowing investments in renewable energy.

    05

    Investment Income & Capital Management

    Net investment income increased 15%, contributing meaningfully to overall results. Operating cash flow for the quarter totaled $43 million, influenced by tax credit purchase activity, bonuses paid, and higher catastrophe losses. The company raised $300 million in long-term debt at a 5 3/8% coupon with a 10-year maturity, returning its leverage profile to historic averages, and upsized its revolving credit facility to $150 million.

    06

    Strategic Approach & AI Adoption

    RLI maintains a disciplined underwriting approach, focusing on understanding risk, pricing appropriately, and seizing market opportunities while being willing to step back if conditions don't support expected risk-adjusted returns. The company is leveraging AI as a tool to improve data for decision-makers, enhance responsiveness, and increase efficiency, while keeping human intelligence and judgment at the core. This strategy aims to deliver consistent profitable results over time⏳.

    07

    A.M. Best Rating Upgrade

    The RLI Group of companies received an upgrade to A++ from A.M. Best, placing it in a distinguished category of high-quality P&C companies. Management views this as a recognition of RLI's long track record of consistent underwriting results and financial strength, reinforcing its position in the market.

    AI-generated summary of the company’s earnings call. Not investment advice.