RLI Q2 2025 presentation: EPS beat, revenue miss amid underwriting challenges

Introduction & Market Context

RLI Corp (NYSE:RLI), a specialty insurance provider, reported mixed second-quarter 2025 results, with earnings per share exceeding analyst expectations despite falling short on revenue targets. The company’s stock has faced pressure following the announcement, trading at $67.40 as of August 14, 2025, down from the $72.22 reported in the presentation as of June 30.

The specialty insurer delivered an operating earnings per share of $0.84, beating analyst forecasts of $0.79, while posting $499.83 million in revenue against expectations of $579.72 million. This 13.78% revenue miss contributed to the stock’s decline of 0.25% in recent trading.

Quarterly Performance Highlights

RLI’s Q2 2025 financial results showed net earnings per diluted share of $1.34, a 50.6% increase from Q2 2024, while operating earnings per share remained relatively flat at $0.84 compared to $0.86 in the prior year period.

As shown in the comprehensive quarterly financial update below, net premiums earned grew 6.0% to $401.9 million, though underwriting income declined 11.1% to $62.2 million compared to the same period last year:

The company’s combined ratio, a key measure of underwriting profitability where lower is better, deteriorated to 84.5% from 81.5% in Q2 2024. Despite this increase, the ratio remains well below the industry average and reflects continued profitability in RLI’s underwriting operations.

Segment Performance Analysis

RLI maintains a diversified product portfolio across three main segments: Casualty (59%), Property (32%), and Surety (9%). The company operates through both excess and surplus (E&S) lines (36%) and specialty admitted markets (64%).

The following chart illustrates the company’s product mix by net written premium:

Segment performance was mixed in Q2 2025:

• Casualty: Net premiums earned increased 12.2% to $234.6 million, but underwriting income declined 19.4% to $8.3 million, with the combined ratio deteriorating to 96.5% from 95.1%.
• Property: Net premiums earned decreased 2.5% to $130.7 million, with underwriting income down 7.0% to $49.5 million. Despite the decline, this segment maintained strong profitability with a 62.1% combined ratio.
• Surety: Net premiums earned grew modestly by 1.9% to $36.6 million, while underwriting income fell 32.3% to $4.4 million, with the combined ratio increasing to 87.9% from 81.8%.

During the earnings call, management noted challenges in the property market, with CEO Craig Kleethermans emphasizing, "Our success is not measured by being the largest market, but by consistently delivering strong profitable results to our shareholders."

Financial Strength and Market Position

RLI continues to maintain strong financial ratings and industry recognition, which support its competitive position in specialty insurance markets. The company holds an A+ (Superior) rating from A.M. Best and an A (Strong) rating from S&P Global, and has been recognized as a Ward’s 50 Top P&C Performer for 35 consecutive years.

The following image highlights the company’s financial strength indicators:

With a market capitalization of $6.63 billion and 1,146 employees, RLI has established itself as a significant player in the specialty insurance market. The company’s leadership team averages 28 years of industry experience and 18 years with RLI, providing stability and expertise.

Key market information as of June 30, 2025, is summarized below:

Underwriting Discipline and Reserve Management

RLI’s long-term success has been built on disciplined underwriting, as evidenced by 29 consecutive years with a combined ratio below 100% and 38 out of 41 years below this profitability threshold. The company has consistently outperformed the industry average combined ratio, as illustrated in the following chart:

This disciplined approach extends to reserve management, with the company reporting $511 million in reserve releases since December 31, 2020. During Q2 2025, RLI experienced favorable development in prior years’ loss reserves, resulting in a $24.4 million net increase in underwriting income.

Investment Portfolio and Income

RLI’s investment portfolio is conservatively positioned with a target allocation of 80% bonds and 20% equities. As of June 30, 2025, the actual allocation included 31.8% corporate bonds, 17.4% government/agency securities, and 18.3% equities, among other investments.

The company reported a 16% increase in net investment income during Q2 2025, contributing positively to overall results. The portfolio maintains an AA- quality rating with a duration of 4.9 years.

The following chart shows the investment portfolio allocation and net investment income trends:

Dividend History and Shareholder Returns

One of RLI’s most impressive achievements is its 50-year history of consecutive dividend increases, a milestone reached in February 2025. The company has maintained a balanced approach to capital management, returning $904 million to shareholders since December 31, 2020.

The following chart illustrates RLI’s dividend growth history, including both regular and special dividends:

Despite recent stock price pressure, RLI has delivered a 20-year annual shareholder return of 14.7%, outperforming both the S&P 500 (10.7%) and S&P P&C Index (10.8%) over the same period.

Strategic Initiatives and Outlook

RLI’s strategy focuses on creating sustainable value through industry-leading products, expertise, and customer service. The company emphasizes cycle management, platform enhancements, talent acquisition, and disciplined pursuit of adjacent product opportunities.

The company’s key measurements of success highlight its long-term performance metrics:

Looking ahead, RLI faces several challenges, including a softening commercial property market, increased competition in the E&S property sector, inflation in commercial auto, and potential impacts from tort reform. During the earnings call, management discussed acquisition cost pressures and pricing dynamics across segments, indicating areas of both opportunity and concern.

Despite these challenges, RLI remains focused on long-term value creation through strategic investments in technology and underwriting capabilities. The company’s conservative approach to risk management and capital allocation, combined with its track record of profitability, position it to navigate market cycles effectively while continuing to deliver shareholder value.

Full presentation:

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