Earnings call transcript: RLI Corp Q2 2025 sees mixed earnings results

RLI Corp reported its second-quarter 2025 financial results, showing an earnings per share (EPS) of $0.84, beating analysts’ expectations of $0.79. The company fell short on revenue, reporting $499.83 million against a forecast of $579.72 million. The stock reacted negatively, with a 0.79% drop in regular trading and a further decline of 0.42% in pre-market activity, closing at $69.06. According to InvestingPro data, RLI maintains strong financial health with a GOOD overall score, though net income is expected to decrease this year. The company’s current P/E ratio stands at 22.54x.

Key Takeaways

• EPS exceeded forecasts by 6.33%.
• Revenue missed expectations by 13.78%.
• Stock price fell by 0.79% in regular trading.
• Casualty and surety segments showed growth, while property declined.
• Investment income increased by 16%.

Company Performance

RLI Corp’s performance in Q2 2025 was mixed. The company demonstrated strength in its casualty and surety segments, which grew by 7%, but faced challenges in the property segment, which declined by 10%. Despite a flat top-line growth, RLI maintained a disciplined approach to underwriting and risk selection, reflecting its commitment to profitability over market share. InvestingPro analysis reveals the company has maintained dividend payments for 50 consecutive years, with a current dividend yield of 3.81%. The company’s conservative approach is reflected in its low debt-to-equity ratio of 0.07.

Financial Highlights

• Revenue: $499.83 million, down from expectations.
• Earnings per share: $0.84, surpassing the forecast.
• Total combined ratio: 84.5%, up from 81.5% last year.
• Book value per share increased by 16% year-to-date.
• Operating cash flow rose to $175 million.

Earnings vs. Forecast

RLI Corp’s EPS of $0.84 beat the forecasted $0.79 by 6.33%, marking a positive surprise for investors. However, the revenue miss of 13.78% against expectations indicates challenges in certain segments, particularly in the property market.

Market Reaction

Following the earnings report, RLI’s stock price fell by 0.79% during regular trading hours and continued to decline by 0.42% in pre-market trading. This movement reflects investor concerns over the revenue shortfall, despite the positive EPS surprise. The stock remains closer to its 52-week low of $67.12, indicating cautious market sentiment. Based on InvestingPro’s Fair Value analysis, RLI appears fairly valued at current levels. Subscribers to InvestingPro can access 6 additional key insights about RLI, along with comprehensive financial metrics and expert analysis in the Pro Research Report.

Outlook & Guidance

RLI Corp remains focused on long-term value creation, with strategic investments in technology and underwriting capabilities. The company expects continued cautious reserve management and aims to explore profitable market segments. Future EPS projections for the coming quarters range from $0.53 to $0.94, with revenue forecasts indicating modest growth.

Executive Commentary

• "Our success is not measured by being the largest market, but by consistently delivering strong profitable results to our shareholders," said Craig Kleethermans, President and CEO.
• Jen Klobnach, Chief Operating Officer, emphasized, "We do not have top line goals at our line," highlighting the company’s focus on profitability over size.

Risks and Challenges

• Softening commercial property market presents ongoing challenges.
• Increased competition in the E&S property sector with 20 new entrants.
• Inflation in commercial auto remains a concern.
• Potential impacts of tort reform and acquisition cost pressures.
• Exposure to catastrophe-prone areas, though mitigated by increased reinsurance coverage.

Q&A

During the earnings call, analysts inquired about acquisition cost pressures and pricing dynamics across segments. Discussions also covered loss cost trends in transportation, potential benefits of tort reform, and the health of the construction market, indicating areas of both opportunity and concern for RLI Corp.

Full transcript - RLI Corp (RLI) Q2 2025:

Conference Moderator: Good morning, and welcome to the RLI Corp. Second Quarter Earnings Teleconference. After management’s prepared remarks, we will open the conference up for questions and answers. Before we get started, let me remind everyone that through the course of the teleconference, RLI management may make comments that reflect their intentions, beliefs and expectations for the future. As always, these forward looking statements are subject to certain factors and uncertainties, which could cause actual results to differ materially.

Please refer to the risk factors described in the company’s various SEC filings, including in the annual report on Form 10 ks as supplemented in Forms 10 Q, all of which should be reviewed carefully. The company has filed a Form eight ks with the Securities and Exchange Commission that contains the press release announcing fourth quarter results. During the call, RLI management may refer to operating earnings and earnings per share from operations, which are non GAAP measures of financial results. RLI’s operating earnings and earnings per share from operations consist of net earnings after the elimination of after tax realized gains or losses and after tax unrealized gains or losses on equity securities. IRLI’s management believes these measures are useful in gauging core operating performance across reporting periods that may not be comparable to other companies’ definitions of operating earnings.

The Form eight ks contains a reconciliation between operating earnings and net earnings. The Form eight ks and press release are available at the company’s website at www.rlicorp.com. Will now turn the conference over to Chief Investment Officer and Treasurer, Mr. Aaron Dieffendaler. Please go ahead.

Craig Kleethermans, President and CEO, RLI Corp: Good morning, all. We hope everyone is having a great summer. We appreciate you joining us to review RLI’s results for the second quarter and first half of twenty twenty five. We have the usual participation for today’s call: Craig Kleethermans, President and CEO Jen Klobnach, Chief Operating Officer and Todd Bryant, Chief Financial Officer. In typical form, our agenda will begin with Craig offering some overall remarks, Todd will outline the financial results, and Jen will present color on market conditions and our product portfolio.

We will then have the operator open the line for questions, and Craig will close with some final thoughts. Craig? Well, thank you, Aaron, and good morning, everyone. We appreciate your participation on today’s call and look forward to addressing your questions after Todd and Jen walk through our results. We are pleased with our second quarter results, which included 84.5 combined ratio and underwriting profitability across all segments.

While top line growth was flat, reflecting significant softening in the commercial property market, we continue to see healthy underlying growth across most of our diversified niche product portfolio. Year to date, book value per share has grown 16% inclusive of dividends on an 82 combined ratio and double digit growth in net investment income. At ROI, we take a long term view with a focus on discipline, continuous improvement and sustainability. We concentrate on what we can control and adjust our strategy as market conditions evolve. For example, in wheels based exposures where legal system abuse is prevalent, we’re taking significant rate and being more selective.

In property, we’re choosing not to compete where the risk reward profile doesn’t make sense. Strong companies are willing to address challenges head on, pulling back where needed and leading into the products where the risk return is in balance. That’s how we operate and how we are incentivized, prioritizing profitability and long term value creation over short term results. Despite some select challenges, we still see attractive opportunities to use across most of our portfolio. Our success is not measured by being the largest market, but by consistently delivering strong profitable results to our shareholders and serving our customers with expertise and care through all market cycles.

That is what we will continue to focus on as we have for the last sixty years. With that, I will turn it over to Todd, who will provide some detail on our financial results. Todd? Thanks, Craig. Good morning, everyone.

Yesterday, we reported second quarter operating earnings of $0.84 per share, supported by solid underwriting performance and a 16% increase in investment income. As a reminder, per share data reflects the two for one stock split that was due to shareholders at the 2024

Todd Bryant, Chief Financial Officer, RLI Corp: and distributed in January. Underwriting income benefited from continued growth in earned premium and positive results on

Craig Kleethermans, President and CEO, RLI Corp: the current accident year were bolstered by favorable development on prior year’s reserves across all three segments. Our total combined ratio was 84.5, up from 81.5 last year reflecting modest increases in the underlying loss and expense ratios though both remain in line with expectations. Overall, top line was flat between periods. Our casualty insurance segments posted growth while property declined reflective of increased competition and rate pressure on catastrophe exposed business. On a GAAP basis, second quarter net earnings totaled $1.34 per share versus $0.89 in Q2 twenty twenty four.

This comparison was heavily influenced by the relative price performance of equity securities between periods as $44,000,000 of unrealized equity gains this quarter outpaced the $4,000,000 of unrealized gains for the same period last year. Turning to segment performance, property experienced a 10% decline in gross premiums, which was influenced by rate decreases in E and S property. However, our Marine and Hawaii homeowners products continued to deliver growth. Jim will provide additional detail on sub segment market conditions shortly. Contributing to property’s bottom line was $10,000,000 of favorable prior year’s development, including $5,000,000 in reductions related to Hurricane Helene, where losses continued to trend below initial estimates.

Storm losses and catastrophe events in the quarter totaled $12,500,000 which was marginally below last year. While the loss ratio improved slightly, the expense ratio increased three points driven by changes in our reinsurance and higher acquisition related expenses. All in, property continued its strong performance posting a 62 combined ratio in the quarter.

Todd Bryant, Chief Financial Officer, RLI Corp: In

Craig Kleethermans, President and CEO, RLI Corp: casualty, gross premiums advanced 7% and we posted a 96.5 combined ratio for Q2. The segment benefited from $15,500,000 of favorable prior year’s reserve development, partially offset by a higher underlying loss ratio

Jen Klobnach, Chief Operating Officer, RLI Corp: and

Craig Kleethermans, President and CEO, RLI Corp: $1,500,000 in Q2 catastrophe losses related to certain package policies. Prior year’s reserve benefits were realized across multiple products with notable contributions from general liability, excess liability and personal umbrella. We continue to closely monitor wheels based exposures, an area we’ve discussed previously at length. Reserve actions taken in the 2024 appear to be sufficient and we continue to approach more challenged coverages with rate increases and underwriting actions to address the current loss environment. Surety’s gross premium was up 7% over last year with all sub segments experiencing growth.

The combined ratio for the quarter was 87.9 and underwriting income benefited from $2,300,000 of favorable reserve development. The expense ratio rose reflecting higher acquisition costs and increased investments in technology and people. Turning to investments, operating cash flow for Q2 totaled 175,000,000 up $33,000,000 from last year, providing a solid foundation for continued portfolio activity. April’s market volatility offered an opportunity to attractively add to our equity allocation, while the balance of the quarter was again focused on high quality fixed income where treasuries and corporate bonds governed most of the effort to add income. Average purchase yields were 4.7% in the quarter which is 70 basis points above our book yield.

On a total return basis, the market’s welcome recovery in May and June resulted in a positive 2.9% return for the quarter capping an excellent first half of the year. Beyond our traditional invested assets, our investee earnings totaled $2,500,000 in the quarter. Incorporating comprehensive earnings of $1.55 per share and adjusting for dividends, book value per share increased 16% from year end 2024. All in, we are pleased with our second quarter and first half performance. And with that, I’ll turn the call over to Jen.

Jen?

Jen Klobnach, Chief Operating Officer, RLI Corp: Thank you, Todd. Two of our three segments experienced solid growth in the quarter with a 7% increase in premiums, both casualty and surety. This was offset by anticipated headwinds for E and S property where market conditions remain challenging. As a reminder, we do not have top line goals at our line. Our product leaders who are closest to the business determine when is the right time to grow to take advantage of attractive market conditions and when it is time to shrink because terms and conditions reduce the likelihood of producing an underwriting profit.

We do not have a targeted mix of business between property, surety, and casualty. Again, the mix that we produce is based on the relative opportunities in each of those segments and has fluctuated materially over market cycles. In the most recent hard market, we grew our E and S property group to take advantage of the attractive market conditions until it became a large part of our product portfolio as it was producing considerable returns. Now as conditions soften, our underwriters are emphasizing selection and discipline. In total, the property segment’s premium declined by 10% in the quarter, influenced by wind rates, which were down 13% compared to last year.

Competition has increased from MGAs and admitted carriers, where abundant capacity has been less disciplined on rates and, more importantly, terms and conditions. Entering the hurricane season, our exposure is down 10% from year end, while rates on business we can write are still above our benchmark pricing and include acceptable terms and conditions. The earthquake market is also challenging as more small businesses in California decide to self insure this peril. Submissions are down seven percent, while rates are down 9% in the quarter. Our brokers know we are a stable market, providing excellent service, who will pay what we owe when claims arrive.

We are well positioned to support our insurers should there be events that hit our shores this year, and we continue to resolve claims from prior events in a timely and dependable manner. Our other product offerings within the property segment continue to find profitable growth opportunities. Marine premium was up 2% in the quarter driven by inland marine, while competition has increased in the ocean cargo space. Hawaii homeowners premium is up 35% this quarter as we continue to roll over business from markets that withdrew or retracted after the Maui wildfires. Our team’s dedication to service is helping us win new business, and we achieved a 16% rate increase in the quarter.

Loss activity for these products has been as expected, and they contributed nicely to our bottom line. The surety segment premium grew 7% in the quarter, led by our commercial surety book. We renewed our reinsurance treaty effective April 1 and purchased more limits so we can offer additional support as our accounts bonding needs grow. Our contract surety premiums moderated in the quarter after strong growth over the last few years. We are continuously reviewing credit quality and supporting contractors to build projects that are appropriately sized

Several new bonding requirements, continuous marketing efforts, and easy to use digital tools are helping us win business in this segment. We’re looking for more growth in this high performing segment and are focused on enhancing our capabilities for our producers and principals. We’re also improving processes for our underwriting to make more time to focus on underwriting and servicing our customers. Casualty premium also grew by 7% in the quarter. Personal umbrella led the way with 24% growth, including a 9% rate increase.

We have an approved rate filing with effective date starting July 1 that will positively impact the second half of this year. New business policy counts in certain venues have slowed as we have increased required underlying limits and worked with our producers to diversify our business geographically. We are continuously learning from our data and refining our approach to the market. Our e and s casualty division, which writes primary and excess liability coverage, generated strong growth and underwriting profit in the quarter. The top line was up 13% as we stay in front of our producers and ask for business, resulting in an increase in submissions of over 20%.

Although we’re seeing opportunities for growth throughout the country, we are competing against both standard and non admitted markets who are leveraging their auto offering to win the liability business. We are a bit more cautious on auto coverages as this exposure requires specialized underwriting to be successful. Our primary and excess teams collaborate to offer our producers a comprehensive service oriented solution. Speaking of auto exposure, rates in our transportation division were up 12% in an environment that remains highly competitive. We have had a handful of accounts cancel and move midterm for less premium and have lost accounts at renewal due to competition.

We manage this business with the bottom line in mind and have leaned into helping our insurers improve their safety practices through our in house experienced loss control team. We believe our focus on safety is a differentiator and attracts better mix. With elevated severity in the auto industry, we use both rate increases and risk selection to target a profitable bottom line. For all auto coverages across our portfolio, we achieved 14% rate increases in the second quarter. We are sharing information across business units related to application questions, underwriting guidelines, and claim experience so our underwriters can learn from each other.

We are being more selective on offering auto liability coverage in our packaged products. Overall, we had a great underwriting result in the second quarter. We stuck to our business model of making decisions with our bottom line and long term success in mind. We’re looking for underwriters who have a similar mindset and are always open to growing in new classes if we find the right talent. While this upcoming property market conditions create headwinds for our top line, we have planted seeds throughout our portfolio that would grow over time under the right conditions.

We’ve added coverages or found adjacencies that help our producers solve our customers’ needs. We have a strong community that works together to support our customers and each other. We see opportunities to profitably grow in areas of our portfolio where it makes sense as we navigate more volatile market conditions. And now I’ll turn the call over to the moderator to open it up for questions.

Conference Moderator: Thank you. The question and answer session will begin at this time. The questions will be taken in the order that they are received. And our first question today comes from Gregory Peters at Raymond James. Gregory, your line is open.

Please go ahead.

Todd Bryant, Chief Financial Officer, RLI Corp: Great. Good morning, everyone. I want to go back to the comments on you talked about higher acquisition costs in property. Maybe you can just broaden that out. Just give us some color on what’s going on, on the acquisition cost front, both in property and in casualty?

Are you seeing pressure in the casualty side considering where rates are? Or is that declining? Just give us a sense of how things are moving there.

Craig Kleethermans, President and CEO, RLI Corp: I’ll start a little bit, Greg. I think Jen will have some additional flavor there. There is some pressure on the commission side, I would say, in terms of in property and surety from that standpoint. You are seeing a little bit of a mix shift as well. That’s probably more noticeable on the surety side.

We’re writing less energy, and that came with a fairly low acquisition expense ratio. I think also on on surety,

Aaron Dieffendaler, Chief Investment Officer and Treasurer, RLI Corp: we

Craig Kleethermans, President and CEO, RLI Corp: talked about it, and Jen mentioned it as well in her openers, the investments in the technology, the digital experience, the, you know, customer relationship management, we’ve invested heavily in there. So you’re seeing some in terms of people, in terms of technology, and in terms some pressure on the commission side as well in both of those segments. And then more generally, if you look at our across all segments, our book value growth in the quarter was pretty high. And some of those retirement and incentive plans have that. The growth in book value is a component.

So that broadly would cross over all segments. And, Jen, if there’s additional flavor there?

Jen Klobnach, Chief Operating Officer, RLI Corp: The only thing I would add is we we did, I’ll say, a little more reinsurance, in terms of filling out a little bit our co participations under a cap treaty as well as additional one that we bought in surety. And so that’s on a net basis that makes our expense ratio move a little bit more fast.

Todd Bryant, Chief Financial Officer, RLI Corp: Got it. You know, there’s a obviously, there’s a lot of discussion in the marketplace about the softening of pricing in certain lines, and obviously, casualty seems to be holding up well. Maybe you could give us some perspective on where the pricing pressure is coming. Is it more in the wholesale brokerage channel? Is it more the retail channel?

Just give us some perspective on how pricing is shaking out by distribution channel.

Jen Klobnach, Chief Operating Officer, RLI Corp: That’s an interesting question. I would say I’m not sure if we can point to a distribution channel. We we think about it more in our segments or in our products. I think generally, there’s just been a lot more competition in certain places. For example, in the e n s property space that we compete in, we’ve had about 20 new entrants in that space over the last two years.

That’s a combination of new MGAs or carriers that are reentering that space because they saw that the returns were so good. And so that has pressured those rates just with, you know, more mouths to feed there. On the casual side, sometimes it’s hard for us to relate rate change, especially if you’re trying to compare to other carriers because, you know, it all depends on the coverage we provide. You know, we tailor our coverage, for example, in our unit casualty group to where we offer probably slimmer coverage. We actually charge maybe a little bit less than we’re offering less coverage.

And when you look at our rate change, it’s a bit unremarkable because we’re starting from a position where we tend to make an underwriting profit. Other carriers over the last couple years have disclosed, you know, adverse development and construction liability coverages, and so they’re probably needing to get more rate in that space. So we look at it from a standpoint of rate adequacy. We balance, you know, the pressure to give back some rate with kind of risk selection components. So there are walk away rates that we have in most of our lines of business that the actuaries help, you know, describe to the underwriters so that we understand where we’re at from a profitability standpoint and and where is that loan since where the market is at that point.

So that’s kind of a an environment description of what we’re dealing with. I don’t know if you have any follow-up questions.

Todd Bryant, Chief Financial Officer, RLI Corp: I I guess just related to that, I’m I’m just trying to get the sense, you know, with rates going down in certain lines, there’s always the profit sharing component and contingent commission component. And I’m just wondering how that settles out with the downward rate pressure coming into certain lines of business.

Jen Klobnach, Chief Operating Officer, RLI Corp: Yeah. If you look at our portfolio, we don’t have many lines that actually have rate decreases going on. We we have a very small book of work comp that that covers our architects and engineers, and so that obviously has had rate pressure over the last few years. In our D and O portfolio, our rate for this quarter was actually minus 2%, so it’s coming back towards flat. And so the only other piece of the portfolio to speak of in terms of rate decreases would be the E and S property component, which I’ve already spoken on.

Craig Kleethermans, President and CEO, RLI Corp: Okay.

Todd Bryant, Chief Financial Officer, RLI Corp: Thanks for the answers.

Conference Moderator: The next question comes from Matt Carletti from Citi. Matt, your line is open. Please go ahead.

Gregory Peters, Analyst, Raymond James: Hey, good morning. Apologies for following up with another kind of softball marshmallow market condition question. I think we got the color on property. I was hoping, Jen or Craig, you could maybe dig in a little more on casualty. And and, specifically, as you look at, let’s say, some of the bigger pockets there, so transportation and general casualty and things like that, you know, what for lack of a better question, kinda what inning do you think you’re in?

Like, what how do you do loss cost trend? Do you foresee kind of the need for continued sizable rate in a lot of those lines to kinda keep up with lost cost trend or maybe even get back to kind of acceptable returns in in certain areas? Or or do you feel maybe we’re a little closer, like, you know, a little closer maybe, like, property has gotten to where, you know, you could see the the the peak in sight?

Craig Kleethermans, President and CEO, RLI Corp: So so, Matt, I’ll start maybe on the transportation front. I think you asked about loss cost trends. I mean, we still see fairly significant double digit inflation on commercial vehicles. We’re in the trucking space, the public auto space, well, I’d say bus space more than we’re not in taxis or anything like that, but and then some specialty commercial auto stuff. I I could tell you our underwriters are assuming double digit loss cost inflation.

So that’s why, I mean, think Jen reported a 12% or 13% or 14% rate increase for the quarter, but we continue that’s really the underwriter driven by getting those increases. Now we are running into still running into competition there. And I know the previous question was about MGAs, I think, a little bit. We’re still seeing a lot of MGA competition on transportation front, the commercial auto front, which is shocking given we think that’s like ground zero for some of this legal system abuse. Mhmm.

But, you know, sometimes people have to feel the pain before they learn a lesson. So our underwriters are willing to walk away from the business if they’re not getting the increase they need. They’re also trying to provide loss control services to keep the cost down for them. And then I’d say at the end of the day, some of it’s about selection. Right?

We think we have some of the best underwriters in the business that are narrow and deep in a given space. They know which accounts they can still maybe only get a moderate rate increase on but still be able to be profitable whereas there are some maybe 30%, 40% rate increases to be profitable and in those cases we’re probably not going be the one that writes that account. Don’t know. Jim, you wanna comment about any of the other

Jen Klobnach, Chief Operating Officer, RLI Corp: I mean, the other thing I would add is, you know, the biggest pressure is on those largest accounts. Other companies or MGAs are looking for premium. And so any account that’s north of a million dollars in premium is really targeted, and and and we have lost a few of those. And so our book has shrunk a bit, but it’s really made up of more smaller accounts than as opposed to some of those bigger accounts that we used to have. So there has been a shift in this in our mix.

But having said that, again, our underwriters are focused on rate and risk selection, and both of those are making an impact to to make sure that we’re staying ahead of trends in the industry.

Gregory Peters, Analyst, Raymond James: Great. That’s very helpful. Thank you. Appreciate it.

Conference Moderator: The next question comes from Meyer Shields from KBW. Your line is now open. Please go ahead.

Aaron Dieffendaler, Chief Investment Officer and Treasurer, RLI Corp: Great. Thanks, and good morning. I think it might have been Janet touched a little bit on mix shift within surety. And I was hoping you could dig a little bit deeper. I’m just trying to understand the change in the accident year loss ratio or accident year combined ratio compared to the first quarter because it does look like it was from the expense side.

Jen Klobnach, Chief Operating Officer, RLI Corp: Well, I’ll tell you, last year, I think it was in the first quarter, we did recognize a large surety commercial surety loss, and so that affected the loss ratio as well as the we had some reinstatement premium, which would have affected the expense ratio in that first quarter. When you compare six months to six months, that doesn’t stand out quite as much. But I think surety in terms of the loss ratio and expense ratio, you know, part of it is this additional, reinsurance layer that we purchased as of April 1. And so there’s a little more cost with that top layer of reinsurance. In terms of the mix, you know, contract surety that grown quite a bit these last couple of years, both from, our own investment in people and marketing and providing good service, but also inflation, you know, that that kinda ran at a higher level the last few years.

But commercial has kept up to some extent too. We’ve also invested in people in that space and worked closely with our producers to make sure that we’re getting to see business. We also have a a nice portfolio of transactional business where we’ve ramped up some of the capabilities available to our producers so they can transact that business online very easily. So the combination of all those things, I would say, has grown our portfolio. I don’t actually think the mix within there has changed that much with the exception of retracting a bit from the old oil and gas component and really shifting more towards solar farm implementations and things of that nature that come in a different cost structure.

Craig Kleethermans, President and CEO, RLI Corp: The the other thing on the side go ahead. We did yeah. I’m sorry. The the other thing on the loss side is is we did have quite a bit larger favorable development in the first quarter on surety than in the second quarter. Both were favorable, but first quarter was up quite a bit.

You see that in the loss ratio. The expense ratio, think Jen noted several things there. It’s not significantly different if I look at the commission side, premium tax and the other policy acquisition than what it was in the first quarter. A bit higher, but those investments continue on that technology side. The ease of doing business is very important.

And investing in new relationships, I think, that was mentioned. So those things are all things that we’re continuing to invest in and willing to trade a bit that higher expense ratio for that very low loss ratio.

Aaron Dieffendaler, Chief Investment Officer and Treasurer, RLI Corp: Okay. That is very helpful. I appreciate that. Second question, we’ve had, I guess, a couple of states with some tort reform go through. And I’m wondering whether at this point, I know it’s early, that’s

Craig Kleethermans, President and CEO, RLI Corp: why I’m asking the question, is it

Aaron Dieffendaler, Chief Investment Officer and Treasurer, RLI Corp: possible to see any benefits from that in terms of actual loss emergence?

Craig Kleethermans, President and CEO, RLI Corp: Meyer, this is Craig. I mean, I think and Jen can jump in here too. I mean, Georgia is certainly too early. Louisiana, too early. Although it does change a bit your mindset of your underwriters, I think there’s there’s a greater willingness to maybe lean into those markets, whereas before they were much more cautious.

I think on the Florida side, I think certainly, anecdotally, I have heard from some of our claim people that we’ve been able to benefit from some of the tort reform that was done down there, which increases the confidence of your underwriting team, obviously, and allows them to have a greater desire to write business down there. So obviously, there’s constant pressure on the other side trying to peel back some of that tort reform, which we hope we hope people are patient because I think it’s already resulting in reduced rates certainly in property in Florida. Some of it’s being driven by that and then also some on casualty. It’s taking a little pressure off the rate need. So we’d like more states to do it.

I don’t know that you’re gonna see it. I know there’s a lot of push around third party litigation financing, at least to get more disclosure across many different states. I don’t know where we are in regards to that being passed, but we think that’s pretty important for the industry. So at least we know what we’re dealing with, who’s on the other side of the table when we’re trying to negotiate, whether it’s actually an injured party or it’s some sovereign wealth fund that’s investing in our tort system, which obviously we don’t think is a good thing for the industry, just drives costs up over the long term and the consumer ends up paying for that. So not a good thing.

So, genuine, join in there at anything? I think you covered it. Okay. But the APCI is very active in trying to trying to lobby on behalf of the insurance industry and do good for long term for the consumer, to the consumer.

Aaron Dieffendaler, Chief Investment Officer and Treasurer, RLI Corp: Understood. Thank you so much.

Conference Moderator: And the next question comes from Andrew Anderson from Jefferies. Your line is now open. Please go ahead.

Matt Carletti, Analyst, Citi: Hey, good morning. I think you’ve previously talked construction touching about a third of your business. Could you maybe just talk about what you’re seeing in that market as it seems to be maybe slowing, but the surety premium is still pretty good and as is the casualty side. So just maybe some color on what you’re seeing in construction and how that may impact the segments.

Jen Klobnach, Chief Operating Officer, RLI Corp: Sure thing. So it seems like probably last quarter, there was a bit of a pause as various legislative priorities were taking place at the federal level. There’s kind of a pause with uncertainty. I would say in the second quarter, things have calmed down a bit. And so, you know, in our construction book, we participated in a lot of different ways.

We have units that are focused on public construction. That’s more of our surety division. And then we also have units focused on private construction. That’s more of our E and S and our package products. We’ve got people who focus on general contractors.

We have people who focus on subcontractors. Some people focus on the contractor’s equipment or builders’ risk. So we look at it from a lot of different angles. And I would say, generally speaking, the industry appears to be pretty healthy in most regions. I think part of it is that the construction industry is healthy, and then part of our success is that we have emphasized in all of our business units to physically get out and meet with our producers on a regular basis and continue to ask for business.

So that has, impacted our submissions. In most of our lines of business, our submissions in that space are up double digits. And so you need to take a look at it in order to write it, and that’s been a very, very positive trend for us. So we’re not seeing anything, to, you know, like like, create any caution around the growth of that industry. We think it’s pretty healthy at this point in time.

Matt Carletti, Analyst, Citi: Thanks. And then just within casualty, I think if we take the $1,500,000 of cat loss, it kind of gets to a flat ex cat, ex PYD loss ratio quarter over quarter. I guess, Juan, is that a good way of thinking about it for maybe the balance of the year? Because it seems that rate is maybe slowing and I would imagine you’re still holding a pretty high conservative loss trend assumption.

Craig Kleethermans, President and CEO, RLI Corp: We have I think if you look, Andrew, we have tended to be cautious on how we book reserves. I don’t think that is something I would expect to change. I think it’s been mentioned that we’re getting rate, what we believe, in excess of loss trend, but we’re going to continue to be cautious there, particularly on the yield based exposure. That will continue.

Conference Moderator: There are no further questions. I will now turn the conference over to Mr. Craig Eaklamps for some closing remarks.

Craig Kleethermans, President and CEO, RLI Corp: Well, thank you all for your interest in our company and for your questions today. At ROI, we have a strong healthy balance sheet with very diversified product and investment portfolios. This offers security to our customers, flexibility and opportunity to our product managers and consistent profitability to our shareholders. We do things differently here and intentionally so. We will continue to make decisions that are in the long term best interest of our customers and our shareholders that allow us agility to respond in challenging and opportunistic markets.

Being different is what we are known for and being different has delivered again to all our key stakeholders. Thank you to all our employee owners for their hard work delivering the difference that works. Thank you and we’ll talk to you next quarter.

Conference Moderator: Ladies and gentlemen, if you wish to access the replay for this call, you may do so on the RLI homepage at www.rlicorp.com. This concludes our conference for today. Thank you all for participating, and have a nice day. All parties may now disconnect.

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