RLI Corp (NYSE: RLI) grows H1 2026 earnings and sells $300M notes
RLI Corp. generated higher earnings in the first half of 2026, with consolidated revenue of $999,439 (in thousands) and net earnings of $222,913 (in thousands), up from $187,550. Diluted EPS reached $2.42. For the second quarter, net earnings were $168,028 (in thousands), or $1.82 per diluted share. Net premiums earned rose 4 percent year over year and net investment income increased 16 percent, aided by $63,628 (in thousands) of unrealized gains on equity securities.
Net underwriting income for the first six months was $117,696 (in thousands) on an 85.8 combined ratio, compared with $132,776 and 83.4 in 2025, as a greater casualty mix and workforce investments raised the expense ratio. Results included $26 million of catastrophe losses in both periods and $75 million of favorable prior-year reserve development. Total assets were $6,413,005 (in thousands) and shareholders’ equity $1,752,115 (in thousands) at June 30, 2026. RLI also issued $300 million of 5.375 percent senior notes due 2036 and repaid short-term borrowings, ending with $297 million of long-term debt.
Positive
- Net earnings for the six months ended June 30, 2026 increased to $222,913 (in thousands) from $187,550, with diluted EPS rising to $2.42 from $2.03, supported by higher investment income and $63,628 (in thousands) of unrealized gains on equity securities.
- Net investment income grew to $88,363 (in thousands) for the first six months of 2026 from $76,144, reflecting higher reinvestment rates and a larger average invested asset base.
Negative
- Net underwriting income for the first six months of 2026 declined to $117,696 (in thousands) from $132,776, and the combined ratio weakened to 85.8 from 83.4, indicating less favorable underwriting profitability.
- Shareholders’ equity decreased to $1,752,115 (in thousands) at June 30, 2026 from $1,778,196 at December 31, 2025, driven in part by other comprehensive loss from rising interest rates on the fixed income portfolio.
Filing Explained
At June 30, RLI had $32 million cash and $206 million short-term investments after substantial dividends and treasury-share purchases.
Form 10-Q is an unaudited quarterly report; this filing updates RLI’s financial position and operations through
The equity statement records dividends of
Outstanding common shares were 91,772,634 at June 30, compared with 91,878,651 at year-end, while treasury shares increased from 45,860,428 to 46,095,401; the filing therefore shows a lower outstanding share count, not an additional-share issuance that would dilute existing ownership.
The 2023 Long-Term Incentive Plan permits up to 8,009,782 shares for equity awards, and 1,557,569 awards had been granted since approval; grants remain subject to the compensation committee’s discretion.
Key Figures
Key Terms
combined ratio financial
underwriting income financial
unrealized gains on equity securities financial
allowance for credit losses financial
Level 3 financial
special cash dividend financial
AI-generated analysis. How Rhea-AI works. Not financial advice.
FAQ
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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification Number) |
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(Address of principal executive offices) | | (Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | Trading Symbol | Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer ☐ | Non-accelerated filer ☐ | Smaller reporting company | |
| | | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of July 15, 2026, the number of shares outstanding of the registrant’s Common Stock was
Table of Contents
Table of Contents
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| | Page |
Part I - Financial Information | 3 | |
Item 1. | Financial Statements | 3 |
| Condensed Consolidated Statements of Earnings and Comprehensive Earnings for the Three and Six-Month Periods Ended June 30, 2026 and 2025 (unaudited) | 3 |
| Condensed Consolidated Balance Sheets as of June 30, 2026 and December 31, 2025 (unaudited) | 4 |
| Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six-Month Periods Ended June 30, 2026 and 2025 (unaudited) | 5 |
| Condensed Consolidated Statements of Cash Flows for the Six-Month Periods Ended June 30, 2026 and 2025 (unaudited) | 6 |
| Notes to Unaudited Condensed Consolidated Financial Statements | 7 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24 |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 36 |
Item 4. | Controls and Procedures | 36 |
Part II - Other Information | 37 | |
Item 1. | Legal Proceedings | 37 |
Item 1a. | Risk Factors | 37 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 37 |
Item 3. | Defaults upon Senior Securities | 37 |
Item 4. | Mine Safety Disclosures | 37 |
Item 5. | Other Information | 37 |
Item 6. | Exhibits | 38 |
Signatures | 39 | |
Table of Contents
PART I - FINANCIAL INFORMATION
Item 1.Financial Statements
RLI Corp. and Subsidiaries
Condensed Consolidated Statements of Earnings and Comprehensive Earnings
(Unaudited)
| | | | | | | | | | | | |
| | For the Three Months | | For the Six Months | ||||||||
| | Ended June 30, | | Ended June 30, | ||||||||
(in thousands, except per share data) |
| 2026 |
| 2025 |
| 2026 |
| 2025 | ||||
Net premiums earned | | $ | | | $ | | | $ | | | $ | |
Net investment income | | | | | | | | | | | | |
Net realized gains | | | | | | | | | | | | |
Net unrealized gains on equity securities | | | | | | | | | | | | |
Consolidated revenue | | $ | | | $ | | | $ | | | $ | |
Losses and settlement expenses | | | | | | | | | | | | |
Policy acquisition costs | | | | | | | | | | | | |
Insurance operating expenses | | | | | | | | | | | | |
Interest expense on debt | | | | | | | | | | | | |
General corporate expenses | | | | | | | | | | | | |
Total expenses | | $ | | | $ | | | $ | | | $ | |
Equity in earnings of unconsolidated investees | | | | | | | | | | | | |
Earnings before income taxes | | $ | | | $ | | | $ | | | $ | |
Income tax expense | | | | | | | | | | | | |
Net earnings | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Other comprehensive earnings (loss), net of tax | | | ( | | | | | | ( | | | |
Comprehensive earnings | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Basic net earnings per share | | $ | | | $ | | | $ | | | $ | |
Diluted net earnings per share | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Weighted average number of common shares outstanding: | | | | | | | | | | | | |
Basic | | | | | | | | | | | | |
Diluted | | | | | | | | | | | | |
See accompanying notes to the unaudited condensed consolidated financial statements.
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RLI Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | |
| | June 30, | | December 31, | ||
(in thousands, except share and per share data) |
| 2026 |
| 2025 | ||
ASSETS | | | | | | |
Investments and cash: | | | | | | |
Fixed income: | | | | | | |
Available-for-sale, at fair value | | $ | | | $ | |
(amortized cost of $ | | | | | | |
(amortized cost of $ | | | | | | |
Equity securities, at fair value (cost - $ | | | | | | |
Short-term investments, at cost which approximates fair value | | | | | | |
Other invested assets | | | | | | |
Cash | | | | | | |
Total investments and cash | | $ | | | $ | |
Accrued investment income | | | | | | |
Premiums and reinsurance balances receivable, net of allowances for uncollectible amounts of $ | | | | | | |
Ceded unearned premium | | | | | | |
Reinsurance balances recoverable on unpaid losses and settlement expenses, net of allowances for uncollectible amounts of $ | | | | | | |
Deferred policy acquisition costs | | | | | | |
Property and equipment, at cost, net of accumulated depreciation of $ | | | | | | |
Investment in unconsolidated investees | | | | | | |
Goodwill and intangibles | | | | | | |
Other assets | | | | | | |
TOTAL ASSETS | | $ | | | $ | |
| | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | |
Liabilities | | | | | | |
Unpaid losses and settlement expenses | | $ | | | $ | |
Unearned premiums | | | | | | |
Reinsurance balances payable | | | | | | |
Funds held | | | | | | |
Income taxes-current | | | | | | |
Income taxes-deferred | | | | | | |
Short-term debt | | | — | | | |
Long-term debt | | | | | | — |
Accrued expenses | | | | | | |
Other liabilities | | | | | | |
TOTAL LIABILITIES | | $ | | | $ | |
| | | | | | |
Shareholders’ Equity | | | | | | |
Common stock ($ | | | | | | |
(Shares authorized - | | | | | | |
( | | | | | | |
( | | $ | | | $ | |
Paid-in capital | | | | | | |
Accumulated other comprehensive earnings (loss) | | | ( | | | ( |
Retained earnings | | | | | | |
Deferred compensation | | | | | | |
Less: Treasury shares, at cost ( | | | ( | | | ( |
TOTAL SHAREHOLDERS’ EQUITY | | $ | | | $ | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | $ | | | $ | |
See accompanying notes to the unaudited condensed consolidated financial statements.
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RLI Corp. and Subsidiaries
Condensed Consolidated Statements of Shareholders’ Equity
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| | |
| | |
| | | Accumulated | |
| | |
| | |
| | |
| | | | | | | | | | | | | Other | | | | | | | | | | |
| | | | Total | | | | | | | | Comprehensive | | | | | | | | Treasury | |||
| | Common | | Shareholders’ | | Common | | Paid-in | | Earnings | | Retained | | Deferred | | Shares | |||||||
(in thousands, except share and per share data) |
| Shares |
| Equity |
| Stock |
| Capital |
| (Loss) |
| Earnings |
| Compensation |
| at Cost | |||||||
Balance, January 1, 2025 | | | | $ | | | $ | | | $ | | | $ | ( | | $ | | | $ | | | $ | ( |
Net earnings | | — | | | | | | — | | | — | | | — | | | | | | — | | | — |
Other comprehensive earnings (loss), net of tax | | — | | | | | | — | | | — | | | | | | — | | | — | | | — |
Deferred compensation | | — | | | — | | | — | | | — | | | — | | | — | | | ( | | | |
Share-based compensation | | | | | | | | — | | | | | | — | | | — | | | — | | | — |
Dividends and dividend equivalents ($ | | — | | | ( | | | — | | | — | | | — | | | ( | | | — | | | — |
Balance, March 31, 2025 | | | | $ | | | $ | | | $ | | | $ | ( | | $ | | | $ | | | $ | ( |
Net earnings | | — | | | | | | — | | | — | | | — | | | | | | — | | | — |
Other comprehensive earnings (loss), net of tax | | — | | | | | | — | | | — | | | | | | — | | | — | | | — |
Deferred compensation | | — | | | — | | | — | | | — | | | — | | | — | | | | | | ( |
Share-based compensation | | | | | | | | | | | | | | — | | | — | | | — | | | — |
Dividends and dividend equivalents ($ | | — | | | ( | | | — | | | — | | | — | | | ( | | | — | | | — |
Balance, June 30, 2025 | | | | $ | | | $ | | | $ | | | $ | ( | | $ | | | $ | | | $ | ( |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Accumulated | | | | | | | | | | |
| | | | | | | | | | | | | Other | | | | | | | | | | |
| | | | Total | | | | | | | | Comprehensive | | | | | | | | Treasury | |||
| | Common | | Shareholders’ | | Common | | Paid-in | | Earnings | | Retained | | Deferred | | Shares | |||||||
(in thousands, except share and per share data) | | Shares | | Equity | | Stock | | Capital | | (Loss) | | Earnings | | Compensation | | at Cost | |||||||
Balance, January 1, 2026 | | | | $ | | | $ | | | $ | | | $ | ( | | $ | | | $ | | | $ | ( |
Net earnings | | — | | | | | | — | | | — | | | — | | | | | | — | | | — |
Other comprehensive earnings (loss), net of tax | | — | | | ( | | | — | | | — | | | ( | | | — | | | — | | | — |
Deferred compensation | | — | | | — | | | — | | | — | | | — | | | — | | | ( | | | |
Share-based compensation | | | | | | | | | | | | | | — | | | — | | | — | | | — |
Dividends and dividend equivalents ($ | | — | | | ( | | | — | | | — | | | — | | | ( | | | — | | | — |
Balance, March 31, 2026 | | | | $ | | | $ | | | $ | | | $ | ( | | $ | | | $ | | | $ | ( |
Net earnings | | — | | | | | | — | | | — | | | — | | | | | | — | | | — |
Other comprehensive earnings (loss), net of tax | | — | | | ( | | | — | | | — | | | ( | | | — | | | — | | | — |
Deferred compensation | | — | | | — | | | — | | | — | | | — | | | — | | | | | | ( |
Purchases of treasury shares | | ( | | | ( | | | — | | | — | | | — | | | — | | | — | | | ( |
Share-based compensation | | | | | | | | — | | | | | | — | | | — | | | — | | | — |
Dividends and dividend equivalents ($ | | — | | | ( | | | — | | | — | | | — | | | ( | | | — | | | — |
Balance, June 30, 2026 | | | | $ | | | $ | | | $ | | | $ | ( | | $ | | | $ | | | $ | ( |
See accompanying notes to the unaudited condensed consolidated financial statements.
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RLI Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | |
| | For the Six Months | ||||
| | Ended June 30, | ||||
(in thousands) |
| 2026 |
| 2025 | ||
Net cash provided by operating activities | | $ | | | $ | |
Cash Flows from Investing Activities | | | | | | |
Purchase of: | | | | | | |
Fixed income securities, available-for-sale | | $ | ( | | $ | ( |
Equity securities | | | ( | | | ( |
Property and equipment | | | ( | | | ( |
Other | | | ( | | | ( |
Proceeds from sale of: | | | | | | |
Fixed income securities, available-for-sale | | | | | | |
Equity securities | | | | | | |
Other | | | | | | |
Proceeds from call or maturity of: | | | | | | |
Fixed income securities, available-for-sale | | | | | | |
Net proceeds from purchase of short-term investments | | | ( | | | ( |
Net cash used in investing activities | | $ | ( | | $ | ( |
Cash Flows from Financing Activities | | | | | | |
Proceeds from issuance of debt | | $ | | | $ | — |
Payment of debt | | | ( | | | — |
Cash dividends paid | | | ( | | | ( |
Proceeds from stock option exercises | | | | | | |
Purchases of treasury shares | | | ( | | | — |
Net cash used in financing activities | | $ | ( | | $ | ( |
Net increase in cash | | $ | ( | | $ | ( |
Cash at the beginning of the period | | | | | | |
Cash at June 30, | | $ | | | $ | |
See accompanying notes to the unaudited condensed consolidated financial statements.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 1. | BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
A. BASIS OF PRESENTATION
The unaudited interim condensed consolidated financial statements of RLI Corp. (the Company) and subsidiaries have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP). These condensed consolidated financial statements do not include all the disclosures required by GAAP for annual financial statements and should be read in conjunction with our 2025 Annual Report on Form 10-K. In the opinion of the Company’s management, the condensed consolidated financial statements reflect all adjustments of a normal and recurring nature that are necessary for fair financial statement presentation. The results of operations for any interim period are not necessarily indicative of the operating results for a full year. Certain reclassifications were made to 2025 to conform to the classifications used in the current year.
The preparation of the unaudited condensed consolidated financial statements requires management to make estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, and the reported amounts of revenue and expenses during the period. These estimates are inherently subject to change and actual results could differ significantly from these estimates.
B. ADOPTED ACCOUNTING STANDARDS
No new accounting standards applicable in 2026 materially impact our financial statements.
C. PROSPECTIVE ACCOUNTING STANDARDS
2024-03—Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses
The guidance in ASU 2024-03 requires disaggregation of certain expenses into specified categories in the notes to the financial statements. Each relevant expense caption on the face of the statement of earnings that includes specific expenses, such as employee compensation, depreciation and intangible asset amortization, are required to be separately disclosed in a tabular presentation. Additionally, a separate total of selling expenses is required to be disclosed, along with a definition of what is included in selling expenses.
This ASU is effective for fiscal years beginning after December 15, 2026 and interim periods beginning after December 15, 2027. Although the Company continues to evaluate the impact of adopting this new accounting standard, the amendments are disclosure-related and should not have a material impact on our financial statements.
2025-06—Intangibles-Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal -Use Software
The guidance in ASU 2025-06 removes the concept of project stages and requires the capitalization of software costs when management has committed to funding the software project and it is probable that the project will be completed. This ASU is effective for fiscal years beginning after December 15, 2027, but early adoption is permitted as of the beginning of an annual reporting period. The Company continues to evaluate the impact of adopting this new accounting standard, but does not expect the standard will have a material impact on our financial statements.
D. REINSURANCE
Ceded unearned premiums and reinsurance balances recoverable on unpaid losses and settlement expenses are reported separately as an asset, rather than being netted with the related liability, since reinsurance does not relieve the Company of our liability to policyholders. Such balances are subject to the credit risk associated with the individual reinsurer. We continually monitor the financial condition of our reinsurers and actively follow up on any past due or disputed amounts. As part of our monitoring efforts, we review reinsurers’ annual financial statements and Securities and Exchange Commission filings for those that are publicly traded. We also review insurance industry developments that may impact the financial condition of our reinsurers. We analyze the credit risk associated with our reinsurance balances recoverable by monitoring the AM Best and
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Standard & Poor’s (S&P) ratings of our reinsurers. We subject our reinsurance balances recoverable to detailed recoverability tests, including a segment-based analysis using the average default rating percentage by S&P rating, which assists the Company in assessing the sufficiency of its allowance. Additionally, we perform an in-depth reinsurer financial condition analysis prior to the renewal of our reinsurance placements.
Our policy is to charge to earnings, in the form of an allowance, an estimate of unrecoverable amounts from reinsurers. This allowance is reviewed on an ongoing basis to ensure that the amount makes a reasonable provision for reinsurance balances that we may be unable to recover. Once regulatory action (such as receivership, finding of insolvency, order of conservation or order of liquidation) is taken against a reinsurer, the paid and unpaid recoverable balances for the reinsurer are specifically identified and written off through the use of our allowance for estimated unrecoverable amounts from reinsurers. When we write off such a balance, it is done in full. We then re-evaluate the overall allowance and determine whether the balance is sufficient and, if needed, an additional allowance is recognized.
The allowance for uncollectible amounts on paid reinsurance balances receivable was $
E. INTANGIBLE ASSETS
The composition of goodwill and intangible assets is detailed in the following table:
| | | | | | |
| | June 30, | | December 31, | ||
(in thousands) |
| 2026 |
| 2025 | ||
Goodwill | | | | | | |
Surety | | $ | | | $ | |
Casualty | | | | | | |
Total goodwill | | $ | | | $ | |
Indefinite-lived intangibles | | | | | | |
Total goodwill and intangibles | | $ | | | $ | |
Annual impairment assessments were performed on our goodwill and state insurance license indefinite-lived intangible assets during the second quarter of 2026. Based upon these reviews,
F. EARNINGS PER SHARE
Basic earnings per share (EPS) is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the dilution that could occur if securities or other contracts to issue common stock or common stock equivalents were exercised or converted into common stock. When inclusion of these items increases the earnings per share or reduces the loss per share, the effect on earnings is anti-dilutive. Under these circumstances, the diluted net earnings or net loss per share is computed excluding these items. The following represents a reconciliation of the numerator and denominator of the basic and diluted EPS computations contained in the unaudited condensed consolidated financial statements:
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| | | | | | | | | | | | | | | | | | |
| | For the Three Months | | For the Three Months | ||||||||||||||
| | Ended June 30, 2026 | | Ended June 30, 2025 | ||||||||||||||
| | Income | | Shares | | Per Share | | Income | | Shares | | Per Share | ||||||
(in thousands, except per share data) |
| (Numerator) |
| (Denominator) |
| Amount |
| (Numerator) |
| (Denominator) |
| Amount | ||||||
Basic EPS | | | | | | | | | | | | | | | | | | |
Earnings available to common shareholders | | $ | | |
| | | $ | | | $ | | |
| | | $ | |
Effect of Dilutive Securities | | | | | | | | | | | | | | | | | | |
Stock options and restricted stock units | | | — | |
| | | | | | | — | |
| | | | |
Diluted EPS | | | | | | | | | | | | | | | | | | |
Earnings available to common shareholders | | $ | | |
| | | $ | | | $ | | |
| | | $ | |
Anti-dilutive securities excluded from diluted EPS | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | For the Six Months | | For the Six Months | ||||||||||||||
| | Ended June 30, 2026 | | Ended June 30, 2025 | ||||||||||||||
| | Income | | Shares | | Per Share | | Income | | Shares | | Per Share | ||||||
(in thousands, except per share data) |
| (Numerator) |
| (Denominator) |
| Amount |
| (Numerator) |
| (Denominator) |
| Amount | ||||||
Basic EPS | | | | | | | | | | | | | | | | | | |
Earnings available to common shareholders | | $ | | |
| | | $ | | | $ | | |
| | | $ | |
Effect of Dilutive Securities | | | | | | | | | | | | | | | | | | |
Stock options and restricted stock units | | | — | |
| | | | | | | — | |
| | | | |
Diluted EPS | | | | | | | | | | | | | | | | | | |
Earnings available to common shareholders | | $ | | |
| | | $ | | | $ | | |
| | | $ | |
Anti-dilutive securities excluded from diluted EPS | | | | | | | | | | | | | | | | | | |
G. COMPREHENSIVE EARNINGS
Our comprehensive earnings include net earnings plus after-tax unrealized gains and losses on our available-for-sale fixed income portfolio. In reporting the components of comprehensive earnings, we used the federal statutory tax rate of
Unrealized losses, net of tax, recognized in other comprehensive earnings (loss) were $
The following table illustrates the changes in the balance of each component of accumulated other comprehensive earnings (loss) for each period presented in the unaudited condensed consolidated financial statements:
| | | | | | | | | | | | |
(in thousands) | | For the Three Months | | For the Six Months | ||||||||
| | Ended June 30, | | Ended June 30, | ||||||||
Unrealized Gains (Losses) on Available-for-Sale Securities |
| 2026 |
| 2025 |
| 2026 |
| 2025 | ||||
Beginning balance | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
Other comprehensive earnings (loss) before reclassifications | | | ( | | | | | | ( | | | |
Amounts reclassified from accumulated other comprehensive earnings | | | | | | | | | | | | |
Net current-period other comprehensive earnings (loss) | | $ | ( | | $ | | | $ | ( | | $ | |
Ending balance | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
Balance of securities for which an allowance for credit losses has been recognized in net earnings | | | | | | | | $ | | | $ | |
Credit losses on or the sale of an available-for-sale security results in amounts being reclassified from accumulated other comprehensive earnings (loss) to current period net earnings. The effects of reclassifications out of accumulated other comprehensive earnings (loss) by the respective line items of net earnings are presented in the following table:
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| | | | | | | | | | | | | | | |
| | Amount Reclassified from Accumulated Other | | | | ||||||||||
(in thousands) | | Comprehensive Earnings (Loss) | | | | ||||||||||
| | For the Three Months | | For the Six Months | | | | ||||||||
Component of Accumulated | | Ended June 30, | | Ended June 30, | | | Affected line item in the | ||||||||
Other Comprehensive Earnings (Loss) |
| 2026 |
| 2025 |
| 2026 |
| 2025 |
|
| Statement of Earnings | ||||
Unrealized gains and losses on available-for-sale securities | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | | Net realized gains (losses) |
| | | | | | ( | | | | | | ( | | | Credit gains (losses) presented within net realized gains |
| | $ | ( | | $ | ( | | $ | ( | | $ | ( | | | Earnings (loss) before income taxes |
| | | | | | | | | | | | | | | Income tax (expense) benefit |
| | $ | ( | | $ | ( | | $ | ( | | $ | ( | | | Net earnings (loss) |
H. FAIR VALUE MEASUREMENTS
Fair value is defined as the price in the principal market that would be received for an asset to facilitate an orderly transaction between market participants on the measurement date. We determined the fair value of certain financial instruments based on their underlying characteristics and relevant transactions in the marketplace. We maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The following are the levels of the fair value hierarchy and a brief description of the type of valuation inputs that are used to establish each level. Financial assets are classified based upon the lowest level of significant input that is used to determine fair value.
Level 1 is applied to valuations based on readily available, unadjusted quoted prices in active markets for identical assets.
Level 2 is applied to valuations based upon quoted prices for similar assets in active markets, quoted prices for identical or similar assets in inactive markets; or valuations based on models where the significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities) or can be corroborated by observable market data.
Level 3 is applied to valuations that are derived from techniques in which one or more of the significant inputs are unobservable.
As a part of management’s process to determine fair value, we utilize widely recognized, third-party pricing sources to determine our fair values. We have obtained an understanding of the third-party pricing sources’ valuation methodologies and inputs. The following is a description of the valuation techniques used for financial assets that are measured at fair value, including the general classification of such assets pursuant to the fair value hierarchy.
Corporate, Agencies, Government and Municipal Bonds: The pricing vendor employs a multi-dimensional model which uses standard inputs including (listed in approximate order of priority for use) benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, market bids/offers and other reference data. The pricing vendor also monitors market indicators, as well as industry and economic events. All bonds valued using these techniques are classified as Level 2.
Mortgage-backed Securities (MBS)/Commercial Mortgage-backed Securities (CMBS) and Asset-backed Securities (ABS): The pricing vendor evaluation methodology primarily includes interest rate movements and new issue data. Evaluation of the tranches (non-volatile, volatile or credit sensitivity) is based on the pricing vendors’ interpretation of accepted modeling and pricing conventions. This information is then used to determine the cash flows for each tranche, benchmark yields, pre-payment assumptions and to incorporate collateral performance. To evaluate MBS and CMBS volatility, an option adjusted spread model is used in combination with models that simulate interest rate paths to determine market price information. This process allows the pricing vendor to obtain evaluations of a broad universe of securities in a way that reflects changes in yield curve, index rates, implied volatility, mortgage rates and recent trade activity. MBS/CMBS and ABS with corroborated, observable inputs are classified as Level 2. All of our MBS/CMBS and ABS are deemed Level 2.
Regulation D Private Placement Securities: All Regulation D privately-placed bonds are deemed Level 3. The pricing vendor evaluation methodology for these securities includes a combination of observable and unobservable inputs. Observable
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inputs include public corporate spread matrices classified by sector, rating and average life, as well as investment and non-investment grade matrices created from fixed income indices. Unobservable inputs include a liquidity spread premium calculated based on public corporate spread and private corporate spread matrices. The quantitative detail of the liquidity spread premium is neither provided nor reasonably available to the Company. An increase to the credit spread assumptions would result in a lower fair value.
For all of our fixed income securities classified as Level 2, we periodically conduct a review to assess the reasonableness of the fair values provided by our pricing services. Our review consists of a two-pronged approach. First, we compare prices provided by our pricing services to those provided by an additional source. In some cases, we obtain prices from securities brokers and compare them to the prices provided by our pricing services. If discrepancies are found in our comparisons, we compare our prices to actual reported trade data for like securities. No changes to the fair values supplied by our pricing services have occurred as a result of our reviews. Based on these assessments, we have determined that the fair values of our Level 2 fixed income securities provided by our pricing services are reasonable.
Equity Securities: As of June 30, 2026, nearly all of our equity holdings were traded on an exchange. Exchange traded equities have readily observable price levels and are classified as Level 1 (fair value based on quoted market prices). Pricing for the equity securities not traded on an exchange is provided by a third-party pricing source using observable inputs and are classified as Level 2. Pricing for equity securities not traded on an exchange rely on one or more unobservable inputs and are classified as Level 3.
Due to the relatively short-term nature of cash, short-term investments, accounts receivable and accounts payable, their carrying amounts are reasonable estimates of fair value. Our investments in private funds, classified as other invested assets, are measured using the investments’ net asset value per share and are not categorized within the fair value hierarchy.
2. INVESTMENTS
Our investments are primarily composed of fixed income debt securities and common stock equity securities. We carry our equity securities at fair value and categorize all of our debt securities as available-for-sale, which are carried at fair value.
Realized gains and losses on disposition of investments are based on the specific identification of the investments sold on the settlement date. The following is a summary of the disposition of fixed income and equity securities for the six-month periods ended June 30, 2026 and 2025:
| | | | | | | | | | | | |
Sales | | Proceeds | | Gross Realized | | Net Realized | ||||||
(in thousands) |
| From Sales |
| Gains |
| Losses |
| Gain (Loss) | ||||
2026 | | | | | | | | | | | | |
Fixed income securities - available-for-sale | | $ | | | $ | | | $ | ( | | $ | ( |
Equity securities | | | | | | | | | ( | | | |
2025 | | | | | | | | | | | | |
Fixed income securities - available-for-sale | | $ | | | $ | | | $ | ( | | $ | ( |
Equity securities | | | | | | | | | ( | | | |
| | | | | | | | | | | | |
Calls/Maturities | | | | | Gross Realized | | Net Realized | |||||
(in thousands) |
| Proceeds |
| Gains |
| Losses |
| Gain (Loss) | ||||
2026 | | | | | | | | | | | | |
Fixed income securities - available-for-sale | | $ | | | $ | | | $ | — | | $ | |
2025 | | | | | | | | | | | | |
Fixed income securities - available-for-sale | | $ | | | $ | | | $ | ( | | $ | ( |
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FAIR VALUE MEASUREMENTS
Assets measured at fair value on a recurring basis are summarized below:
| | | | | | | | | | | | |
| | As of June 30, 2026 | ||||||||||
| | Quoted Prices in | | Significant Other | | Significant | | | | |||
| | Active Markets for | | Observable | | Unobservable | | | | |||
| | Identical Assets | | Inputs | | Inputs | | | | |||
(in thousands) |
| (Level 1) |
| (Level 2) |
| (Level 3) |
| Total | ||||
Fixed income securities - available-for-sale | | | | | | | | | | | | |
U.S. government | | $ | — | | $ | | | $ | — | | $ | |
U.S. agency | | | — | | | | | | — | | | |
Non-U.S. government & agency | | | — | | | | | | | | | |
Agency MBS | | | — | | | | | | — | | | |
ABS/CMBS/MBS* | | | — | | | | | | — | | | |
Corporate | | | — | | | | | | | | | |
Municipal | | | — | | | | | | — | | | |
Total fixed income securities - available-for-sale | | $ | — | | $ | | | $ | | | $ | |
Equity securities | | | | | | — | | | | | | |
Total | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
| | As of December 31, 2025 | ||||||||||
| | Quoted Prices in | | Significant Other | | Significant | | | | |||
| | Active Markets for | | Observable | | Unobservable | | | | |||
| | Identical Assets | | Inputs | | Inputs | | | | |||
(in thousands) |
| (Level 1) |
| (Level 2) |
| (Level 3) |
| Total | ||||
Fixed income securities - available-for-sale | | | | | | | | | | | | |
U.S. government | | $ | — | | $ | | | $ | — | | $ | |
U.S. agency | | | — | | | | | | — | | | |
Non-U.S. government & agency | | | — | | | | | | | | | |
Agency MBS | | | — | | | | | | — | | | |
ABS/CMBS/MBS* | | | — | | | | | | — | | | |
Corporate | | | — | | | | | | | | | |
Municipal | | | — | | | | | | — | | | |
Total fixed income securities - available-for-sale | | $ | — | | $ | | | $ | | | $ | |
Equity securities | | | | | | — | | | | | | |
Total | | $ | | | $ | | | $ | | | $ | |
* | Non-agency asset-backed, commercial mortgage-backed and mortgage-backed securities |
The following table summarizes changes in the balance of securities whose fair value was measured using significant unobservable inputs (Level 3).
| | | | | | | | | | | | |
|
| Three Months Ended June 30, | | Six Months Ended June 30, | ||||||||
(in thousands) | | 2026 |
| 2025 |
| 2026 |
| 2025 | ||||
Beginning balance | | $ | | | $ | | | $ | | | $ | |
Net realized and unrealized gains (losses) | | | | | | | | | | | | |
Included in other comprehensive earnings (loss) | | | | | | | | | ( | | | |
Purchases | | | | | | | | | | | | |
Sales / Calls / Maturities | | | ( | | | ( | | | ( | | | ( |
Transfers into Level 3 | | | — | | | — | | | — | | | — |
Transfers out of Level 3 | | | — | | | — | | | — | | | — |
Balance as of June 30, | | $ | | | $ | | | $ | | | $ | |
Change in unrealized gains (losses) during the period for Level 3 assets held at period-end - included in other comprehensive earnings (loss) | | $ | | | $ | | | $ | ( | | $ | |
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The amortized cost and fair value of available-for-sale fixed income securities by contractual maturity were as follows:
| | | | | | |
| | June 30, 2026 | ||||
(in thousands) |
| Amortized Cost |
| Fair Value | ||
Due in one year or less | | $ | | | $ | |
Due after one year through five years | | | | | | |
Due after five years through 10 years | | | | | | |
Due after 10 years | | | | | | |
ABS/CMBS/MBS* | | | | | | |
Total available-for-sale | | $ | | | $ | |
* | Asset-backed, commercial mortgage-backed and mortgage-backed securities |
The amortized cost and fair value of available-for-sale securities are presented in the tables below. Amortized cost does not include accrued interest receivable of $
| | | | | | | | | | | | | | | |
| | June 30, 2026 | |||||||||||||
| | Cost or | | Allowance | | Gross | | Gross | | | | ||||
| | Amortized | | for Credit | | Unrealized | | Unrealized | | Fair | |||||
(in thousands) |
| Cost |
| Losses |
| Gains |
| Losses |
| Value | |||||
U.S. government | | $ | | | $ | — | | $ | | | $ | ( | | $ | |
U.S. agency | | | | | | — | | | | | | ( | | | |
Non-U.S. government & agency | | | | | | — | | | | | | ( | | | |
Agency MBS | | | | | | — | | | | | | ( | | | |
ABS/CMBS/MBS* | | | | | | ( | | | | | | ( | | | |
Corporate | | | | | | ( | | | | | | ( | | | |
Municipal | | | | | | — | | | | | | ( | | | |
Total Fixed Income | | $ | | | $ | ( | | $ | | | $ | ( | | $ | |
| | | | | | | | | | | | | | | |
| | December 31, 2025 | |||||||||||||
| | Cost or | | Allowance | | Gross | | Gross | | | | ||||
| | Amortized | | for Credit | | Unrealized | | Unrealized | | Fair | |||||
(in thousands) |
| Cost |
| Losses |
| Gains |
| Losses |
| Value | |||||
U.S. government | | $ | | | $ | — | | $ | | | $ | ( | | $ | |
U.S. agency | | | | | | — | | | | | | ( | | | |
Non-U.S. government & agency | | | | | | — | | | | | | ( | | | |
Agency MBS | | | | | | — | | | | | | ( | | | |
ABS/CMBS/MBS* | | | | | | ( | | | | | | ( | | | |
Corporate | | | | | | ( | | | | | | ( | | | |
Municipal | | | | | | — | | | | | | ( | | | |
Total Fixed Income | | $ | | | $ | ( | | $ | | | $ | ( | | $ | |
* | Non-agency asset-backed, commercial mortgage-backed and mortgage-backed securities |
Allowance for Credit Losses and Unrealized Losses on Fixed Income Securities
A reversible allowance for credit losses is recognized on available-for-sale fixed income securities, if applicable. Several criteria are reviewed to determine if securities in the fixed income portfolio should be included in the allowance for expected credit loss evaluation, including:
| ● | Changes in technology that may impair the earnings potential of the investment, |
| ● | The discontinuance of a segment of business that may affect future earnings potential, |
| ● | Reduction of or non-payment of interest and/or principal, |
| ● | Specific concerns related to the issuer’s industry or geographic area of operation, |
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| ● | Significant or recurring operating losses, poor cash flows and/or deteriorating liquidity ratios and |
| ● | Downgrades in credit quality by a major rating agency. |
If changes in interest rates and credit spreads do not reasonably explain the unrealized loss for an available-for-sale security, or if any of the criteria above indicate a potential credit loss, the security is subjected to a discounted cash flow analysis. Inputs into the discounted cash flow analysis include prepayment assumptions for structured securities, default rates and recoverability rates based on credit rating. The allowance for any security is limited to the amount that the security’s fair value is below amortized cost. As of June 30, 2026, the discounted cash flow analysis resulted in an allowance for credit losses on
| | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, | ||||||||
(in thousands) |
| 2026 |
| 2025 |
| 2026 |
| 2025 | ||||
Beginning balance | | $ | | | $ | | | $ | | | $ | |
Increase to allowance from securities for which credit losses were not previously recorded | | | | | | | | | | | | |
Reduction from securities sold during the period | | | ( | | | ( | | | ( | | | — |
Reductions from intent to sell securities | | | | | | ( | | | ( | | | — |
Net increase (decrease) from securities that had an allowance at the beginning of the period | | | ( | | | | | | ( | | | |
Balance as of June 30, | | $ | | | $ | | | $ | | | $ | |
We recognized $
As of June 30, 2026, in addition to the securities included in the allowance for credit losses, the fixed income portfolio contained
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| | | | | | | | | | | | | | | | | | |
| | June 30, 2026 | | December 31, 2025 | ||||||||||||||
(in thousands) |
| < 12 Mos. |
| 12 Mos. & |
| Total |
| < 12 Mos. |
| 12 Mos. & |
| Total | ||||||
U.S. government | | | | | | | | | | | | | | | | | | |
Fair value | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
Amortized cost | | | | | | | | | | | | | | | | | | |
Unrealized loss | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
U.S. agency | | | | | | | | | | | | | | | | | | |
Fair value | | $ | | | $ | | | $ | | | $ | — | | $ | | | $ | |
Amortized cost | | | | | | | | | | | | — | | | | | | |
Unrealized loss | | $ | ( | | $ | ( | | $ | ( | | $ | — | | $ | ( | | $ | ( |
Non-U.S. government | | | | | | | | | | | | | | | | | | |
Fair value | | $ | | | $ | | | $ | | | $ | — | | $ | | | $ | |
Amortized cost | | | | | | | | | | | | — | | | | | | |
Unrealized Loss | | $ | ( | | $ | ( | | $ | ( | | $ | — | | $ | ( | | $ | ( |
Agency MBS | | | | | | | | | | | | | | | | | | |
Fair value | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
Amortized cost | | | | | | | | | | | | | | | | | | |
Unrealized loss | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
ABS/CMBS/MBS* | | | | | | | | | | | | | | | | | | |
Fair value | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
Amortized cost | | | | | | | | | | | | | | | | | | |
Unrealized loss | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
Corporate | | | | | | | | | | | | | | | | | | |
Fair value | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
Amortized cost | | | | | | | | | | | | | | | | | | |
Unrealized loss | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
Municipal | | | | | | | | | | | | | | | | | | |
Fair value | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
Amortized cost | | | | | | | | | | | | | | | | | | |
Unrealized loss | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
Total fixed income | | | | | | | | | | | | | | | | | | |
Fair value | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
Amortized cost | | | | | | | | | | | | | | | | | | |
Unrealized loss | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
* | Non-agency asset-backed, commercial mortgage-backed and mortgage-backed securities |
The following table shows the composition of the fixed income securities in unrealized loss positions, after factoring in the allowance for credit losses, at June 30, 2026 by the National Association of Insurance Commissioners (NAIC) rating and the generally equivalent Standard & Poor’s (S&P) and Moody’s ratings. The vast majority of the securities are rated by S&P and/or Moody’s.
| | | | | | | | | | | | | | | | |
| | Equivalent | | Equivalent | | (dollars in thousands) | | | | |||||||
NAIC |
| S&P |
| Moody’s | | Amortized | | | | | Unrealized | | Percent | | ||
Rating |
| Rating |
| Rating |
| Cost |
| Fair Value |
| Loss |
| to Total | | |||
1 | | AAA/AA/A | | Aaa/Aa/A | | $ | | | $ | | | $ | ( | | | % |
2 | | BBB | | Baa | | | | | | | | | ( | | | % |
3 | | BB | | Ba | | | | | | | | | ( | | | % |
4 | | B | | B | | | | | | | | | ( | | | % |
5 | | CCC | | Caa | | | | | | | | | ( | | | % |
6 | | CC or lower | | Ca or lower | | | — | | | — | | | — | | | % |
| | | | Total | | $ | | | $ | | | $ | ( | | | % |
Other Invested Assets
We had $
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carried at amortized cost and our investment in FHLBC stock is carried at cost. Due to the nature of the LIHTC, HTC and our membership in the FHLBC, their carrying amounts approximate fair value. The private funds are carried at fair value, using each investment’s net asset value.
Our LIHTC interests were $
Our HTC investment had a balance of $
Our investments in private funds totaled $
Investments in Unconsolidated Investees
Our investment in Prime Holdings Insurance Services, Inc. was $
Cash and Short-Term Investments
Cash consists of uninvested balances in bank accounts. Short-term investments primarily consist of money market funds and fixed income securities with a contractual maturity of one year or less at the time of acquisition. Short-term investments are carried at cost, which approximates fair value. We had a cash and short-term investment balance of $
3. DEBT
Outstanding debt totaled $
On March 3, 2026, we completed a public debt offering, issuing $
We repaid $
On May 12, 2026, we repaid $
The average rate on short-term debt was
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4. HISTORICAL LOSS AND LAE DEVELOPMENT
The following table reconciles our unpaid losses and settlement expenses (LAE):
| | | | | | |
| | For the Six Months | ||||
| | Ended June 30, | ||||
(in thousands) |
| 2026 |
| 2025 | ||
Unpaid losses and LAE at beginning of year | | | | | | |
Gross | | $ | | | $ | |
Ceded | | | ( | | | ( |
Net | | $ | | | $ | |
| | | | | | |
Increase (decrease) in incurred losses and LAE | | | | | | |
Current accident year | | $ | | | $ | |
Prior accident years | | | ( | | | ( |
Total incurred | | $ | | | $ | |
| | | | | | |
Loss and LAE payments for claims incurred | | | | | | |
Current accident year | | $ | ( | | $ | ( |
Prior accident years | | | ( | | | ( |
Total paid | | $ | ( | | $ | ( |
| | | | | | |
Net unpaid losses and LAE at June 30, | | $ | | | $ | |
| | | | | | |
Unpaid losses and LAE at June 30, | | | | | | |
Gross | | $ | | | $ | |
Ceded | | | ( | | | ( |
Net | | $ | | | $ | |
For the first six months of 2026, incurred losses and LAE included $
For the first six months of 2025, incurred losses and LAE included $
5. INCOME TAXES
Income tax expense differed from the amounts computed by applying the U.S. federal tax rate of
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| | | | | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended June 30, | | For the Six Months Ended June 30, 2026 | | ||||||||||||||||
| | 2026 | | 2025 | | 2026 | | 2025 | | ||||||||||||
(in thousands) |
| Amount |
| % |
| Amount |
| % |
| Amount |
| % |
| Amount |
| % | | ||||
U.S. federal statutory tax rate | | $ | | | | % | $ | | | | % | $ | | | | % | $ | | | | % |
State and local income taxes, net of federal income tax effect | | | | | | % | | | | | % | | | | | % | | | | | % |
Tax credit | | | ( | | ( | % | | ( | | ( | % | | ( | | ( | % | | ( | | ( | % |
Nontaxable or Nondeductible Items: | | | | | | | | | | | | | | | | | | | | | |
Excess tax benefit on share-based compensation | | | ( | | ( | % | | ( | | ( | % | | ( | | ( | % | | ( | | ( | % |
Other nontaxable or nondeductible items | | | ( | | ( | % | | ( | | ( | % | | | | | % | | | | | % |
Total tax expense | | $ | | | | % | $ | | | | % | $ | | | | % | $ | | | | % |
The effective tax rate is dependent upon the composition of pretax earnings and the related tax effects. The decrease in the effective tax rate was primarily due to the tax deduction related to the $2.00 special dividend paid to our Employee Stock Ownership Plan during the second quarter, as well as greater utilization of tax credits in the first half of the year. In interim periods, income tax expense is adjusted to reflect the estimated annual effective tax rate, and the resulting adjustments are reflected in other nontaxable or nondeductible items.
We have recorded our deferred tax assets and liabilities using the statutory federal tax rate of
6. STOCK BASED COMPENSATION
Our 2015 RLI Corp. Long-Term Incentive Plan (2015 LTIP) was in place from 2015 to 2023. The 2015 LTIP provided for equity-based compensation, including stock options and restricted stock units, up to a maximum of
In 2023, our shareholders approved the 2023 RLI Corp. Long-Term Incentive Plan (2023, LTIP), which provides for equity-based compensation. In conjunction with the adoption of the 2023 LTIP, effective May 4, 2023, awards are no longer granted under the 2015 LTIP. Awards under the 2023 LTIP may be in the form of restricted stock, restricted stock units, stock options (incentive or non-qualified), stock appreciation rights, performance units as well as other stock-based awards. Eligibility under the 2023 LTIP is limited to employees, directors, consultants and independent contractors of the Company or any affiliate. The granting of awards under the 2023 LTIP is solely at the discretion of the Human Capital and Compensation Committee of the board of directors or its delegate. The maximum number of shares of common stock available for distribution under the 2023 LTIP is
Compensation expense is based on the probable number of awards expected to vest. Total compensation expense related to equity awards was $
Stock Options
Under the 2023 LTIP, as under the 2015 LTIP, we grant stock options for shares with an exercise price equal to the fair market value of the shares at the date of grant (subject to adjustments for changes in our capitalization, special dividends and other events as set forth in such plans). Options generally vest and become exercisable over a
For most participants, the requisite service period and vesting period will be the same. For participants who are retirement eligible, defined by the plan as those individuals whose age and years of service equals
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become retirement eligible during the vesting period, the requisite service period over which expense is recognized is the period between the grant date and the attainment of retirement eligibility. Shares issued upon option exercise are newly issued shares.
On May 14, 2026, the board of directors declared a $
The following tables summarize option activity for the six-month period ended June 30, 2026:
| | | | | | | | | | |
| | | | | | | Weighted | | Aggregate | |
| | | | Weighted | | Average | | Intrinsic | ||
| | | | Average | | Remaining | | Value | ||
|
| Options |
| Exercise Price |
| Contractual Life |
| (in 000’s) | ||
Outstanding options at January 1, 2026 | | | | $ | | | | | | |
Options granted | | | | | | | | | | |
Options exercised | | ( | | | | | | | | |
Options canceled/forfeited | | ( | | | | | | | | |
Outstanding options at June 30, 2026 | | | | $ | | | | $ | | |
Exercisable options at June 30, 2026 | | | | $ | | | | $ | | |
The intrinsic value of options exercised, which is the difference between the fair value and the exercise price, was $
The fair value of options was estimated using a Black-Scholes based option pricing model with the following weighted average grant-date assumptions and weighted average fair values as of June 30:
| | | | | | | |
|
| 2026 |
| 2025 | | ||
Weighted-average fair value of grants | | $ | | | $ | | |
Risk-free interest rates | | | | % | | | % |
Dividend yield | | | | % | | | % |
Expected volatility | | | | % | | | % |
Expected option life | | | years | | years | ||
The risk-free rate was determined based on U.S. treasury yields that most closely approximated the options’ expected life. The dividend yield was determined based on the average annualized quarterly dividends paid during the most recent five-year period and incorporated a consideration for special dividends paid in recent history. The expected volatility was calculated based on the median of the rolling volatilities for the expected life of the options. The expected option life was determined based on historical exercise behavior and the assumption that all outstanding options will be exercised at the midpoint of the current date and remaining contractual term, adjusted for the demographics of the current year’s grant.
Restricted Stock Units
In addition to stock options, restricted stock units (RSUs) are granted with a value equal to the closing stock price of the Company’s stock on the dates the units are granted. For employees, these units generally have a
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| | | | | |
| | | | Weighted | |
| | | | Average | |
| | | | Grant Date | |
|
| RSUs |
| Fair Value | |
Nonvested at January 1, 2026 | | | | $ | |
Granted | | | | | |
Reinvested | | | | | |
Vested | | ( | | | |
Forfeited | | ( | | | |
Nonvested at June 30, 2026 | | | | $ | |
7. OPERATING SEGMENT INFORMATION
The Company’s insurance operations are managed and reported in
Amortization of deferred acquisition costs represents the recognition of commission and premium taxes over the life of insurance policies, in proportion to premium revenue recognized. The other policy acquisition costs line item includes other expenses associated with underwriting, but that cannot be specifically associated with the successful acquisition of a policy, including, but not limited to, employment costs for underwriters and underwriting support as well as costs for policy acquisition systems. Insurance operating expenses reflect allocated costs from various support departments, such as corporate technology, accounting, human resources and facilities, among others.
Net investment income consists of the interest and dividend income streams from our investments in fixed income and equity securities. Interest expense represents the cost of debt and lines of credit. General corporate expenses include director and shareholder relation costs and other compensation-related expenses incurred for the benefit of the corporation, but not attributable to the operations of our insurance segments. Investee earnings represents our
All segment revenues are from external customers and all long-lived assets are held domestically. We have no material foreign operations or customer concentrations and have no intersegment revenues.
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The following table summarizes revenues by major product type within each operating segment:
| | | | | | | | | | | | |
| | For the Three Months | | For the Six Months | ||||||||
Net Premiums Earned | | Ended June 30, | | Ended June 30, | ||||||||
(in thousands) |
| 2026 |
| 2025 |
| 2026 |
| 2025 | ||||
Casualty | | | | | | | | | | | | |
Commercial excess and personal umbrella | | $ | | | $ | | | $ | | | $ | |
Commercial transportation | | | | | | | | | | | | |
Professional services | | | | | | | | | | | | |
General liability | | | | | | | | | | | | |
Small commercial | | | | | | | | | | | | |
Executive products | | | | | | | | | | | | |
Other casualty | | | | | | | | | | | | |
Total | | $ | | | $ | | | $ | | | $ | |
Property | | | | | | | | | | | | |
Commercial property | | $ | | | $ | | | $ | | | $ | |
Marine | | | | | | | | | | | | |
Other property | | | | | | | | | | | | |
Total | | $ | | | $ | | | $ | | | $ | |
Surety | | | | | | | | | | | | |
Transactional | | $ | | | $ | | | $ | | | $ | |
Commercial | | | | | | | | | | | | |
Contract | | | | | | | | | | | | |
Total | | $ | | | $ | | | $ | | | $ | |
Grand Total | | $ | | | $ | | | $ | | | $ | |
The following tables present our operating results by segment, as evaluated by the CODM.
| | | | | | | | | | | | |
For the Three Months Ended June 30, 2026 | ||||||||||||
| | | | | | | | | | | | |
(in thousands) | | | Casualty | | | Property | | | Surety | | | Total |
Revenue | | | | | | | | | | | | |
Net premiums earned | | $ | | | $ | | | $ | | | $ | |
Net investment income | | | - | | | - | | | - | | | |
Net realized gains | | | - | | | - | | | - | | | |
Net unrealized gains on equity securities | | | - | | | - | | | - | | | |
Consolidated revenue | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Less: Expenses | | | | | | | | | | | | |
Losses and settlement expenses | | $ | | | $ | | | $ | | | | |
Amortization of deferred acquisition costs | | | | | | | | | | | | |
Other policy acquisition costs | | | | | | | | | | | | |
Insurance operating expenses | | | | | | | | | | | | |
Segment earnings before income taxes | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Depreciation and amortization expense | | $ | | | $ | | | $ | | | | |
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| | | | | | | | | | | | |
For the Three Months Ended June 30, 2025 | ||||||||||||
| | | | | | | | | | | | |
(in thousands) | | | Casualty | | | Property | | | Surety | | | Total |
Revenue | | | | | | | | | | | | |
Net premiums earned | | $ | | | $ | | | $ | | | $ | |
Net investment income | | | - | | | - | | | - | | | |
Net realized gains | | | - | | | - | | | - | | | |
Net unrealized gains on equity securities | | | - | | | - | | | - | | | |
Consolidated revenue | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Less: Expenses | | | | | | | | | | | | |
Losses and settlement expenses | | $ | | | $ | | | $ | | | | |
Amortization of deferred acquisition costs | | | | | | | | | | | | |
Other policy acquisition costs | | | | | | | | | | | | |
Insurance operating expenses | | | | | | | | | | | | |
Segment earnings before income taxes | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Depreciation and amortization expense | | $ | | | $ | | | $ | | | | |
| | | | | | | | | | | | |
For the Six Months Ended June 30, 2026 | ||||||||||||
| | | | | | | | | | | | |
(in thousands) | | | Casualty | | | Property | | | Surety | | | Total |
Revenue | | | | | | | | | | | | |
Net premiums earned | | $ | | | $ | | | $ | | | $ | |
Net investment income | | | - | | | - | | | - | | | |
Net realized gains | | | - | | | - | | | - | | | |
Net unrealized gains on equity securities | | | - | | | - | | | - | | | |
Consolidated revenue | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Less: Expenses | | | | | | | | | | | | |
Losses and settlement expenses | | $ | | | $ | | | $ | | | | |
Amortization of deferred acquisition costs | | | | | | | | | | | | |
Other policy acquisition costs | | | | | | | | | | | | |
Insurance operating expenses | | | | | | | | | | | | |
Segment earnings before income taxes | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Depreciation and amortization expense | | $ | | | $ | | | $ | | | | |
| | | | | | | | | | | | |
For the Six Months Ended June 30, 2025 | ||||||||||||
| | | | | | | | | | | | |
(in thousands) | | | Casualty | | | Property | | | Surety | | | Total |
Revenue | | | | | | | | | | | | |
Net premiums earned | | $ | | | $ | | | $ | | | $ | |
Net investment income | | | - | | | - | | | - | | | |
Net realized gains | | | - | | | - | | | - | | | |
Net unrealized gains on equity securities | | | - | | | - | | | - | | | |
Consolidated revenue | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Less: Expenses | | | | | | | | | | | | |
Losses and settlement expenses | | $ | | | $ | | | $ | | | | |
Amortization of deferred acquisition costs | | | | | | | | | | | | |
Other policy acquisition costs | | | | | | | | | | | | |
Insurance operating expenses | | | | | | | | | | | | |
Segment earnings before income taxes | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Depreciation and amortization expense | | $ | | | $ | | | $ | | | | |
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The following table reconciles segment earnings before income taxes to earnings before income taxes.
| | | | | | | | | | | | |
| | For the Three Months | | For the Six Months | ||||||||
| | Ended June 30, | | Ended June 30, | ||||||||
(in thousands) |
| 2026 |
| 2025 |
| 2026 |
| 2025 | ||||
Reconciliation of earnings before income taxes | | | | | | | | | | | | |
Segment earnings before income taxes | | $ | | | $ | | | $ | | | $ | |
Net investment income | | | | | | | | | | | | |
Net realized gains | | | | | | | | | | | | |
Net unrealized gains on equity securities | | | | | | | | | | | | |
Interest expense on debt | | | ( | | | ( | | | ( | | | ( |
General corporate expenses | | | ( | | | ( | | | ( | | | ( |
Equity in earnings of unconsolidated investees | | | | | | | | | | | | |
Earnings before income taxes | | $ | | | $ | | | $ | | | $ | |
8. LEASES
Right-of-use (ROU) assets are included in the other assets line item and lease liabilities are included in the other liabilities line item of the consolidated balance sheet. We determine if a contract contains a lease at inception and recognize operating lease ROU assets and operating lease liabilities based on the present value of the future minimum lease payments at the commencement date. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Lease agreements may include options to extend or terminate. The options are exercised at our discretion and are included in operating lease liabilities if it is reasonably certain the option will be exercised. Lease agreements have lease and non-lease components, which are accounted for as a single lease component. Operating lease costs for future minimum lease payments are recognized on a straight-line basis over the lease terms. Variable lease costs are expensed in the period in which the obligations are incurred. Sublease income is recognized on a straight-line basis over the sublease term.
The Company’s operating lease obligations are for branch office facilities. The components of lease expense and other lease-related information were as follows:
| | | | | | | | | | | | |
| | For the Three Months | | For the Six Months | ||||||||
| | Ended June 30, | | Ended June 30, | ||||||||
(in thousands) |
| 2026 |
| 2025 |
| 2026 |
| 2025 | ||||
Operating lease cost | | $ | | | $ | | | $ | | | $ | |
Variable lease cost | | | | | | | | | | | | |
Sublease income | | | ( | | | ( | | | ( | | | ( |
Total lease cost | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Cash paid for amounts included in measurement of lease liabilities | | | | | | | | | | | | |
Operating cash outflows from operating leases | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
ROU assets obtained in exchange for new operating lease liabilities | | $ | | | $ | | | $ | | | $ | |
| | | | | | | |
(in thousands) |
| June 30, 2026 |
| December 31, 2025 | | ||
Operating lease ROU assets | | $ | | | $ | | |
Operating lease liabilities | | $ | | | $ | | |
Weighted-average remaining lease term - operating leases | | | years | | years | ||
Weighted-average discount rate - operating leases | | | | % | | | % |
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Future minimum lease payments under non-cancellable leases were as follows:
| | | |
(in thousands) |
| June 30, 2026 | |
2026 | | $ | |
2027 | | | |
2028 | | | |
2029 | | | |
2030 | | | |
2031 | | | |
Thereafter | | | |
Total future minimum lease payments | | $ | |
Less imputed interest | | | ( |
Total operating lease liability | | $ | |
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-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-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-looking statements. Forward-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-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.
OVERVIEW
RLI Corp. is a U.S.-based, specialty insurance company that underwrites select property, casualty and surety products through three major subsidiaries. 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 2025, we achieved our 30th consecutive year of underwriting profitability. Over the 30-year period, we averaged an 87.9 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.
We measure the results of our insurance operations by monitoring growth and profitability across three distinct business segments: casualty, property and surety. Growth is measured in terms of gross premiums written, and profitability is analyzed through underwriting income and combined ratios.
The property and casualty insurance business is cyclical and influenced by many factors, including price competition, economic conditions, natural or man-made disasters (for example, earthquakes, hurricanes, pandemics and terrorism), interest rates, state regulations, court decisions, changes in the law and evolving technologies. One of the unique and challenging features of the property and casualty insurance business is that coverages must be priced before costs have fully developed, because premiums are charged before claims are incurred. This requires that liabilities be estimated and recorded in recognition of future loss and settlement obligations. Due to the inherent uncertainty in estimating these liabilities, there can be no assurance that actual liabilities will equal recorded amounts. If actual liabilities differ from recorded amounts, there will either be an adverse or favorable effect on net earnings.
The casualty portion of our business consists largely of commercial excess, personal umbrella, general liability, transportation and management liability coverages, as well as package business and other specialty coverages, such as professional liability and workers’ compensation for office-based professionals. We also assume a limited amount of risks
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through quota share and excess of loss reinsurance agreements. The casualty business is subject to the risk of estimating losses and related loss reserves because the ultimate settlement of a casualty claim may take several years to fully develop.
Our property segment is comprised primarily of commercial fire, hurricane, earthquake, difference in conditions and marine coverages. We also offer homeowners’ coverages in Hawaii. Property insurance results are subject to the variability introduced by perils such as earthquakes, fires, hurricanes and other storms. Our major catastrophe exposure is to losses caused by windstorms, affecting commercial properties in coastal regions of the United States, and earthquakes, primarily on the West Coast. We limit our net aggregate exposure to a catastrophic event by managing the total policy limits written in a particular region, purchasing reinsurance and maintaining policy terms and conditions throughout all insurance cycles. We also use computer-assisted modeling techniques to provide estimates that help the Company carefully manage the concentration of risks exposed to catastrophic events.
The surety segment specializes in writing small to medium-sized contract surety coverages, including payment and performance bonds. We offer a variety of commercial surety bonds for medium to large-sized businesses across a broad spectrum of industries, including the home builders, financial, healthcare, energy and renewable energy industries. We also offer a variety of transactional bonds, including but not limited to license and permit, notary and court bonds. Often, our surety coverages involve a statutory requirement for bonds. While these bonds typically maintain a relatively low loss ratio, losses may fluctuate due to adverse economic conditions affecting the financial viability of our insureds. The contract surety product guarantees commercial contractors’ contractual obligations for a specific construction project. Generally, losses occur due to the deterioration of a contractor’s financial condition.
The insurance marketplace is competitive across all of our segments. However, we believe that our business model is built to create underwriting income by focusing on sound risk selection and discipline. Our primary focus will continue to be on underwriting profitability, with a secondary focus on premium growth where we believe underwriting profit exists, as opposed to general premium growth or market share measurements.
Key Performance Measures
The following is a list of key performance measures found throughout this report with their definitions, relationships to GAAP measures and explanations of their importance to our operations.
Underwriting Income
Underwriting income or profit represents one measure of the pretax profitability of our insurance operations, and is derived by subtracting losses and settlement expenses, policy acquisition costs and insurance operating expenses from net premiums earned, which are all GAAP financial measures. Each of these components are presented in the statements of earnings but are not subtotaled. However, this information is available in total and by segment in note 7 to the unaudited condensed consolidated financial statements in this quarterly report on Form 10-Q, and in note 11 to the consolidated financial statements in our 2025 Annual Report on Form 10-K, regarding operating segment information. The nearest comparable GAAP measure is earnings before income taxes which, in addition to underwriting income, includes net investment income, net realized gains or losses, net unrealized gains or losses on equity securities, general corporate expenses, debt costs and our portion of earnings from unconsolidated investees. A reconciliation of net earnings to underwriting income follows:
| | | | | | | | | | | | |
| | For the Three Months | | For the Six Months | ||||||||
| | Ended June 30, | | Ended June 30, | ||||||||
(in thousands) |
| 2026 |
| 2025 |
| 2026 |
| 2025 | ||||
Net earnings | | $ | 168,028 | | $ | 124,336 | | $ | 222,913 | | $ | 187,550 |
Income tax expense | | | 42,660 | | | 32,179 | | | 55,116 | | | 47,596 |
Earnings before income taxes | | $ | 210,688 | | $ | 156,515 | | $ | 278,029 | | $ | 235,146 |
Equity in earnings of unconsolidated investees | | | (2,970) | | | (2,467) | | | (5,117) | | | (5,515) |
General corporate expenses | | | 6,223 | | | 4,754 | | | 8,947 | | | 7,702 |
Interest expense on debt | | | 4,441 | | | 1,350 | | | 6,794 | | | 2,685 |
Net unrealized (gains) losses on equity securities | | | (103,024) | | | (43,500) | | | (63,628) | | | (1,182) |
Net realized gains | | | (9,407) | | | (15,004) | | | (18,966) | | | (29,916) |
Net investment income | | | (46,042) | | | (39,418) | | | (88,363) | | | (76,144) |
Net underwriting income | | $ | 59,909 | | $ | 62,230 | | $ | 117,696 | | $ | 132,776 |
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Combined Ratio
The combined ratio, which is derived from components of underwriting income, is a common industry performance measure of profitability for underwriting operations and is calculated in two components. First, the loss ratio is losses and settlement expenses divided by net premiums earned. The second component, the expense ratio, reflects the sum of policy acquisition costs and insurance operating expenses divided by net premiums earned. All items included in these components of the combined ratio are presented in our GAAP consolidated financial statements. The sum of the loss and expense ratios is the combined ratio. The difference between the combined ratio and 100 reflects the per-dollar rate of underwriting income or loss.
Critical Accounting Policies
In preparing the unaudited condensed consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses for the reporting period. Actual results could differ significantly from those estimates.
The most critical accounting policies involve significant estimates and include those used in determining the liability for unpaid losses and settlement expenses, investment valuation, recoverability of reinsurance balances, deferred policy acquisition costs and deferred taxes. For a detailed discussion of each of these policies, refer to our 2025 Annual Report on Form 10-K.
There have been no significant changes to critical accounting policies during the year.
RESULTS OF OPERATIONS
Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
Net premiums earned increased 4 percent, driven primarily by products in our casualty segment. Investment income was up 16 percent, reflecting higher reinvestment rates and an increased average asset base. Market increases resulted in $64 million of unrealized gains on equity securities during the first six months of 2026, compared to $1 million in the same period of 2025. Realized gains in 2026 included $20 million of realized gains on equity securities, primarily due to rebalancing within our equity strategies, and $1 million of realized losses on fixed income securities. This compares to $29 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 first six months of 2025.
| | | | | | |
| | For the Six Months | ||||
| | Ended June 30, | ||||
Consolidated Revenues (in thousands) |
| 2026 |
| 2025 | ||
Net premiums earned | | $ | 828,482 | | $ | 800,249 |
Net investment income | | | 88,363 | | | 76,144 |
Net realized gains | | | 18,966 | | | 29,916 |
Net unrealized gains on equity securities | | | 63,628 | | | 1,182 |
Total consolidated revenue | | $ | 999,439 | | $ | 907,491 |
Underwriting income was $118 million on an 85.8 combined ratio for the first six months of 2026, compared to $133 million on an 83.4 combined ratio in the same period of 2025. Underwriting results were impacted by $26 million of pretax catastrophe losses in both 2026 and 2025. Results for each period benefited from favorable development on prior years’ loss reserves, which provided additional pretax earnings of $75 million in the first six months of 2026, compared to $59 million in 2025.
The loss ratio was 46.2 for the first six months of 2026, compared to 45.2 in 2025. The benefit of greater favorable development on prior years’ loss reserves was offset by 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 39.6 from 38.2. The increase primarily reflected continued investments in our workforce.
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
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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 $5 million of investee earnings from Prime in the first six months of 2026, the same as in the first six months of 2025.
Net earnings for the first six months of 2026 totaled $223 million, compared to $188 million for the same period in 2025. The increase primarily reflected larger unrealized gains on equity securities and higher investment income.
Comprehensive earnings totaled $195 million for the first six months of 2026, compared to $236 million for the first six months of 2025. Other comprehensive earnings (loss) primarily included net after-tax unrealized gains (losses) from the fixed income portfolio. Other comprehensive loss of $28 million in the first six months of 2026 was primarily attributable to rising interest rates, which decreased the fair value of securities held in the fixed income portfolio. Comparatively, $49 million of other comprehensive earnings was recognized in 2025.
Premiums
Gross premiums written increased $30 million for the first six months of 2026, driven by favorable rate movement and growth within our casualty segment. Net premiums earned increased $28 million, primarily due to continued growth within our casualty segment.
| | | | | | | | | | | | | | | | | | |
| | Gross Premiums Written | | | Net Premiums Earned | | ||||||||||||
| | For the Six Months | | | | | For the Six Months | | | | ||||||||
| | Ended June 30, | | | | | Ended June 30, | | | | ||||||||
(in thousands) |
| 2026 |
| 2025 |
| % Change |
| | 2026 |
| 2025 |
| % Change | | ||||
Casualty | | | | | | | | | | | | | | | | | | |
Commercial excess and personal umbrella | | $ | 326,947 | | $ | 276,718 | | 18 | % | | $ | 248,125 | | $ | 206,530 | | 20 | % |
Commercial transportation | | | 80,634 | | | 65,698 | | 23 | % | | | 64,326 | | | 60,274 | | 7 | % |
Professional services | | | 62,081 | | | 59,732 | | 4 | % | | | 56,083 | | | 53,210 | | 5 | % |
General liability | | | 50,389 | | | 53,648 | | (6) | % | | | 45,658 | | | 46,799 | | (2) | % |
Small commercial | | | 43,641 | | | 43,242 | | 1 | % | | | 39,208 | | | 39,915 | | (2) | % |
Executive products | | | 39,192 | | | 38,363 | | 2 | % | | | 11,354 | | | 11,464 | | (1) | % |
Other casualty | | | 43,129 | | | 47,663 | | (10) | % | | | 40,734 | | | 45,494 | | (10) | % |
Total | | $ | 646,013 | | $ | 585,064 | | 10 | % | | $ | 505,488 | | $ | 463,686 | | 9 | % |
Property | | | | | | | | | | | | | | | | | | |
Commercial property | | $ | 223,898 | | $ | 259,416 | | (14) | % | | $ | 141,860 | | $ | 159,688 | | (11) | % |
Marine | | | 96,256 | | | 90,938 | | 6 | % | | | 79,556 | | | 78,726 | | 1 | % |
Other property | | | 33,885 | | | 31,515 | | 8 | % | | | 28,748 | | | 24,794 | | 16 | % |
Total | | $ | 354,039 | | $ | 381,869 | | (7) | % | | $ | 250,164 | | $ | 263,208 | | (5) | % |
Surety | | | | | | | | | | | | | | | | | | |
Transactional | | $ | 29,048 | | $ | 28,851 | | 1 | % | | $ | 26,642 | | $ | 25,756 | | 3 | % |
Commercial | | | 28,834 | | | 32,357 | | (11) | % | | | 25,037 | | | 25,198 | | (1) | % |
Contract | | | 25,602 | | | 25,246 | | 1 | % | | | 21,151 | | | 22,401 | | (6) | % |
Total | | $ | 83,484 | | $ | 86,454 | | (3) | % | | $ | 72,830 | | $ | 73,355 | | (1) | % |
Grand Total | | $ | 1,083,536 | | $ | 1,053,387 | | 3 | % | | $ | 828,482 | | $ | 800,249 | | 4 | % |
Casualty
Gross premiums written for the casualty segment increased $61 million in the first six months of 2026. We continued to benefit from positive rate movement across a large portion of our casualty segment. Personal umbrella expanded its distribution base while achieving favorable rate increases. 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 and our decision to no longer participate in the reinsurance agreement with Prime.
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Property
Gross premiums written for the property segment decreased $28 million in the first six months of 2026. Commercial property declined $36 million as increased market capacity and competition continued to pressure pricing. Marine premiums increased $5 million, driven by strong new business production and continued growth in our inland marine products. Additionally, growth in other property premiums was driven by rate increases for our Hawaii homeowners business and new business opportunities.
Surety
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.
Underwriting Income
| | | | | | |
| | For the Six Months | ||||
| | Ended June 30, | ||||
|
| 2026 |
| 2025 | ||
Underwriting Income (in thousands) | | | | | | |
Casualty | | $ | 9,035 | | $ | 10,360 |
Property | | | 101,684 | | | 106,426 |
Surety | | | 6,977 | | | 15,990 |
Total | | $ | 117,696 | | $ | 132,776 |
| | | | | | |
Combined Ratio | | | | | | |
Casualty | | | 98.2 | | | 97.8 |
Property | | | 59.4 | | | 59.6 |
Surety | | | 90.4 | | | 78.2 |
Total | | | 85.8 | | | 83.4 |
Casualty
The casualty segment recorded underwriting income of $9 million in the first six months of 2026, compared to $10 million for the same period last year. Prior accident years’ reserve releases reduced loss and settlement expenses for the casualty segment by $28 million in 2026, primarily related to accident years 2019 through 2022, as well as 2024 and 2025. Larger drivers of the favorable development were commercial transportation, executive products, professional services and commercial excess, while personal umbrella experienced some adverse development. In comparison, $20 million of prior accident years’ reserves were released in the first six 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 2025.
The combined ratio for the casualty segment was 98.2 in 2026, compared to 97.8 in 2025. The segment’s loss ratio was 61.8 in 2026, down from 61.9 in 2025. The expense ratio for the casualty segment was 36.4, up from 35.9 for the same period last year.
Property
The property segment recorded underwriting income of $102 million for the first six months of 2026, compared to $106 million for the same period last year. Underwriting results for 2026 included $44 million of favorable development on prior years’ loss and catastrophe reserves, offset by $24 million of storm losses. Comparatively, results for 2025 included $28 million of favorable development on prior years’ loss and catastrophe reserves and $24 million of storm and other catastrophe losses.
Underwriting results for the first six months of 2026 resulted in a combined ratio of 59.4, compared to 59.6 for the same period last year. The segment’s loss ratio was 24.2 in 2026, down from 27.0 in 2025, due to increased favorable development
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on prior accident years. The segment’s expense ratio increased to 35.2 in 2026 from 32.6 in the prior year, as a result of continued investments in people on a lower earned premium base.
Surety
The surety segment recorded underwriting income of $7 million for the first six months of 2026, compared to $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 $4 million, compared to $11 million in 2025.
The combined ratio for the surety segment totaled 90.4 for the first six months of 2026, compared to 78.2 for the same period last year. The segment’s loss ratio was 13.8 in 2026, up from 4.8 in 2025, due to lower levels of favorable prior accident years’ reserve development. The expense ratio was 76.6, up from 73.4 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 $88 million during the first six months of 2026, an increase of 16 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 six months of 2026 and 2025 were as follows:
| | | | | | |
|
| 2026 |
|
| 2025 | |
Pretax Yield | | | | | | |
Taxable | | 4.35 | % | | 4.04 | % |
Tax-Exempt | | 3.01 | % | | 2.91 | % |
After-Tax Yield | | | | | | |
Taxable | | 3.44 | % | | 3.19 | % |
Tax-Exempt | | 2.85 | % | | 2.76 | % |
The following table depicts the composition of our investment portfolio at June 30, 2026 as compared to December 31, 2025:
| | | | | | | | | | | |
(in thousands) |
| June 30, 2026 |
| December 31, 2025 | | ||||||
Fixed income | | $ | 3,617,942 |
| 74.2 | % | $ | 3,533,336 |
| 75.7 | % |
Equity securities | | | 959,377 | | 19.7 | % | | 898,876 | | 19.3 | % |
Short-term investments | | | 206,119 | | 4.2 | % | | 120,562 | | 2.6 | % |
Other invested assets | | | 58,661 | | 1.2 | % | | 59,281 | | 1.3 | % |
Cash | | | 32,101 | | 0.7 | % | | 51,565 | | 1.1 | % |
Total investments and cash | | $ | 4,874,200 | | 100.0 | % | $ | 4,663,620 | | 100.0 | % |
We believe our overall asset allocation supports our strategy to preserve capital for policyholders, provide sufficient income to support our insurance operations and effectively grow book value over a long-term investment horizon.
The fixed income portfolio increased by $85 million in the first six months of 2026, as the majority of investment cash flows were directed to the fixed income portfolio. Average fixed income duration was 4.7 years at June 30, 2026, reflecting our liability structure and sound capital position. The equity portfolio increased by $61 million during the first six months of 2026, due to positive performance in the equity markets, primarily in the second quarter. Proceeds from debt issuance were invested into short-term securities, increasing the short-term investment portfolio by $86 million.
Income Taxes
Our effective tax rate for the first six months of 2026 was 19.8 percent, compared to 20.2 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 six-month period in 2026 was primarily due to higher levels of tax credit utilization and deductions related to the $2.00 special dividend paid to our Employee Stock Ownership Plan.
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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.
| | | | | | |
| | For the Three Months | ||||
| | Ended June 30, | ||||
Consolidated Revenues (in thousands) |
| 2026 |
| 2025 | ||
Net premiums earned | | $ | 417,096 | | $ | 401,904 |
Net investment income | | | 46,042 | | | 39,418 |
Net realized gains | | | 9,407 | | | 15,004 |
Net unrealized gains on equity securities | | | 103,024 | | | 43,500 |
Total consolidated revenue | | $ | 575,569 | | $ | 499,826 |
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.
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| | | | | | | | | | | | | | | | | | |
| | Gross Premiums Written | | | Net Premiums Earned | | ||||||||||||
| | For the Three Months | | | | | For the Three Months | | | | ||||||||
| | Ended June 30, | | | | | Ended June 30, | | | | ||||||||
(in thousands) |
| 2026 |
| 2025 |
| % Change |
| | 2026 |
| 2025 |
| % Change | | ||||
Casualty | | | | | | | | | | | | | | | | | | |
Commercial excess and personal umbrella | | $ | 172,414 | | $ | 145,286 | | 19 | % | | $ | 126,854 | | $ | 106,055 | | 20 | % |
Commercial transportation | | | 41,520 | | | 34,782 | | 19 | % | | | 33,632 | | | 30,015 | | 12 | % |
Professional services | | | 32,975 | | | 31,320 | | 5 | % | | | 28,134 | | | 26,623 | | 6 | % |
General liability | | | 25,350 | | | 27,218 | | (7) | % | | | 22,850 | | | 23,869 | | (4) | % |
Small commercial | | | 21,354 | | | 22,097 | | (3) | % | | | 19,886 | | | 20,000 | | (1) | % |
Executive products | | | 22,630 | | | 21,536 | | 5 | % | | | 5,481 | | | 5,521 | | (1) | % |
Other casualty | | | 22,756 | | | 24,371 | | (7) | % | | | 20,085 | | | 22,555 | | (11) | % |
Total | | $ | 338,999 | | $ | 306,610 | | 11 | % | | $ | 256,922 | | $ | 234,638 | | 9 | % |
Property | | | | | | | | | | | | | | | | | | |
Commercial property | | $ | 131,123 | | $ | 148,544 | | (12) | % | | $ | 68,900 | | $ | 76,876 | | (10) | % |
Marine | | | 49,546 | | | 46,212 | | 7 | % | | | 40,337 | | | 41,017 | | (2) | % |
Other property | | | 18,607 | | | 17,061 | | 9 | % | | | 14,549 | | | 12,771 | | 14 | % |
Total | | $ | 199,276 | | $ | 211,817 | | (6) | % | | $ | 123,786 | | $ | 130,664 | | (5) | % |
Surety | | | | | | | | | | | | | | | | | | |
Transactional | | $ | 13,990 | | $ | 14,143 | | (1) | % | | $ | 13,347 | | $ | 13,096 | | 2 | % |
Commercial | | | 13,961 | | | 16,363 | | (15) | % | | | 12,402 | | | 12,422 | | (0) | % |
Contract | | | 13,424 | | | 13,348 | | 1 | % | | | 10,639 | | | 11,084 | | (4) | % |
Total | | $ | 41,375 | | $ | 43,854 | | (6) | % | | $ | 36,388 | | $ | 36,602 | | (1) | % |
Grand Total | | $ | 579,650 | | $ | 562,281 | | 3 | % | | $ | 417,096 | | $ | 401,904 | | 4 | % |
Casualty
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.
Property
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.
Surety
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.
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Underwriting Income
| | | | | | |
| | For the Three Months | ||||
| | Ended June 30, | ||||
|
| 2026 |
| 2025 | ||
Underwriting Income (in thousands) | | | | | | |
Casualty | | $ | 1,742 | | $ | 8,289 |
Property | | | 53,499 | | | 49,511 |
Surety | | | 4,668 | | | 4,430 |
Total | | $ | 59,909 | | $ | 62,230 |
| | | | | | |
Combined Ratio | | | | | | |
Casualty | | | 99.3 | | | 96.5 |
Property | | | 56.8 | | | 62.1 |
Surety | | | 87.2 | | | 87.9 |
Total | | | 85.6 | | | 84.5 |
Casualty
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.
Property
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.
Surety
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.
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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:
| | | | | | |
|
| 2026 | |
| 2025 | |
Pretax Yield | | | | | | |
Taxable | | 4.40 | % | | 4.06 | % |
Tax-Exempt | | 3.04 | % | | 2.95 | % |
After-Tax Yield | | | | | | |
Taxable | | 3.48 | % | | 3.21 | % |
Tax-Exempt | | 2.88 | % | | 2.80 | % |
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.
LIQUIDITY AND CAPITAL RESOURCES
We have three primary types of cash flows: (1) cash flows from operating activities, which consist mainly of cash generated by our underwriting operations and income earned on our investment portfolio, (2) cash flows from investing activities related to the purchase, sale and maturity of investments and (3) cash flows from financing activities that impact our capital structure, such as shareholder dividend payments and changes in debt and shares outstanding.
The following table summarizes cash flows provided by (used in) our activities for the six-month periods ended June 30, 2026 and 2025:
| | | | | | |
(in thousands) |
| 2026 |
| 2025 | ||
Operating cash flows | | $ | 188,049 | | $ | 278,233 |
Investing cash flows | | | (179,614) | | | (269,082) |
Financing cash flows | | | (27,899) | | | (27,527) |
Total | | $ | (19,464) | | $ | (18,376) |
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 flow decreased in the first six months of 2026 compared to the same period in 2025, primarily due to higher loss and settlement expense payments, the purchase of federal income tax credits, and higher employee compensation payments. These decreases were partially offset by higher investment income receipts and 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 $297 million as of June 30, 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 discounts 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. 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.
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On May 12, 2026, we repaid the $50 million borrowed from the Federal Home Loan Bank of Chicago (FHLBC) on November 12, 2025. While the borrowing was outstanding, interest was 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 June 30, 2026, there were no outstanding borrowings with the FHLBC.
As of June 30, 2026, we had cash and other investments maturing within one year of approximately $424 million and an additional $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 believe that cash generated by operations and investments will provide sufficient sources of liquidity to meet our anticipated needs over the next 12 to 24 months. In the event they are not sufficient, we believe cash available from financing activities and other sources will provide sufficient additional liquidity.
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 June 30, 2026 have increased $211 million from December 31, 2025. As of June 30, 2026, our investment portfolio had the following asset allocation breakdown:
| | | | | | | | | | | | | | |
| | Cost or | | Fair | | Unrealized | | % of Total | | | | |||
(in thousands) |
| Amortized Cost |
| Value |
| Gain/(Loss) |
| Fair Value |
|
| Quality* | |||
U.S. government | | $ | 282,536 | | $ | 281,707 | | $ | (829) | | 5.8 | % | | AA+ |
U.S. agency | | | 26,313 | | | 26,194 | | | (119) | | 0.5 | % | | AA+ |
Non-U.S. government & agency | | | 16,884 | | | 16,471 | | | (413) | | 0.3 | % | | A |
Agency MBS | | | 625,626 | | | 594,335 | | | (31,291) | | 12.2 | % | | AA+ |
ABS/CMBS/MBS** | | | 775,674 | | | 758,032 | | | (17,642) | | 15.5 | % | | AA+ |
Corporate | | | 1,609,863 | | | 1,582,543 | | | (27,320) | | 32.5 | % | | A- |
Municipal | | | 423,980 | | | 358,660 | | | (65,320) | | 7.4 | % | | AA+ |
Total fixed income | | $ | 3,760,876 | | $ | 3,617,942 | | $ | (142,934) | | 74.2 | % | | AA- |
Equity | | | 530,730 | | | 959,377 | | | 428,647 | | 19.7 | % | | |
Short-term investments | | | 206,119 | | | 206,119 | | | — | | 4.2 | % | | |
Other invested assets | | | 59,609 | | | 58,661 | | | (948) | | 1.2 | % | | |
Cash | | | 32,101 | | | 32,101 | | | — | | 0.7 | % | | |
Total portfolio | | $ | 4,589,435 | | $ | 4,874,200 | | $ | 284,765 | | 100.0 | % | | |
* | Quality ratings provided by Moody’s, S&P and Fitch |
** | Non-agency asset-backed, commercial mortgage-backed and mortgage-backed securities |
Quality is an average of each bond’s credit rating, adjusted for its relative weighting in the portfolio. As of June 30, 2026, our fixed income portfolio had the following rating distribution:
| | | | | | | | | | | | | | | | | | | | | |
| | |
| | | | | | | | | | | Below | | | | | | | |
| | | | | | | | | | | | | | Investment | | | | | | | |
| | AAA | | AA | | A | | BBB | | Grade | | No Rating | | Fair Value | |||||||
U.S. government | | $ | - | | $ | 281,707 | | $ | - | | $ | - | | $ | - | | $ | - | | $ | 281,707 |
U.S. agency | | | - | | | 26,194 | | | - | | | - | | | - | | | - | | | 26,194 |
Non-U.S. government & agency | | | - | | | 1,387 | | | 7,369 | | | 5,593 | | | - | | | 2,122 | | | 16,471 |
Agency MBS | | | - | | | 594,335 | | | - | | | - | | | - | | | - | | | 594,335 |
ABS/CMBS/MBS* | | | 502,433 | | | 70,035 | | | 121,112 | | | 14,654 | | | 3,303 | | | 46,495 | | | 758,032 |
Corporate | | | 17,548 | | | 150,475 | | | 625,564 | | | 490,054 | | | 162,695 | | | 136,207 | | | 1,582,543 |
Municipal | | | 93,838 | | | 231,546 | | | 32,040 | | | - | | | - | | | 1,236 | | | 358,660 |
Total | | $ | 613,819 | | $ | 1,355,679 | | $ | 786,085 | | $ | 510,301 | | $ | 165,998 | | $ | 186,060 | | $ | 3,617,942 |
* | Non-agency asset-backed, commercial mortgage-backed and mortgage-backed securities |
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As of June 30, 2026, our fixed income portfolio remained well diversified, with 1,977 individual issues.
Our investment portfolio has limited exposure to structured asset-backed securities. As of June 30, 2026, we had $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).
As of June 30, 2026, we had $338 million in commercial and non-agency MBS and $594 million in MBS backed by government sponsored enterprises (GSEs - Freddie Mac, Fannie Mae and Ginnie Mae). Excluding the GSE-backed MBS, our exposure to ABS and CMBS was 15.5 percent of our investment portfolio at quarter end.
We had $1.6 billion in corporate fixed income securities as of June 30, 2026, which includes $143 million invested in a high-yield credit strategy. This high-yield portfolio consists of floating rate bank loans and bonds that are below investment grade in credit quality and offer incremental yield over our core fixed income portfolio.
The municipal portfolio includes approximately 72 percent taxable securities and 28 percent tax-exempt securities. Approximately 91 percent of our municipal bond portfolio maintains an ‘AA’ or better rating, while 100 percent of the municipal bond portfolio is rated ‘A’ or better.
Securities within the equity portfolio are well diversified and are primarily invested in broad index exchange traded funds (ETFs). Our actively managed equity strategy has a preference for dividend income and value oriented security selection with low turnover, which minimizes transaction costs and taxes throughout our long investment horizon.
As of June 30, 2026, our equity portfolio had a dividend yield of 1.3 percent, compared to 1.1 percent for the S&P 500 index. Because of the corporate dividend-received-deduction applicable to our dividend income, we pay an effective tax rate of 13.1 percent on dividends, compared to 21.0 percent on taxable interest and 5.3 percent on municipal bond interest income. The equity portfolio is managed in a diversified and granular manner, with 75 individual securities and five ETF positions. No single company exposure in the equity portfolio represents more than 1 percent of invested assets.
Other invested assets include investments in low-income housing tax credit and historic tax credit partnerships, membership in the FHLBC and investments in private funds.
We had $58 million of investments in unconsolidated investees at June 30, 2026, compared to $54 million at December 31, 2025.
Our investment portfolio does not have any exposure to derivatives.
As of June 30, 2026, our capital structure consisted of $297 million in debt and $1.8 billion of shareholders’ equity. Debt outstanding comprised 14 percent of total capital as of June 30, 2026. Interest and fees on debt obligations totaled $7 million for the first six months of 2026 and $3 million during the same period in 2025. We incurred interest expense on debt at an average annual interest rate of 5.20 percent during the first six months of 2026, compared to 5.18 percent during the same period last year.
On June 12, 2026, we paid a special dividend of $2.00 per share and a regular quarterly cash dividend of $0.18 per share, a 12.5 percent increase over the prior quarter. We have increased dividends in each of the last 51 years.
Our three insurance companies are subsidiaries of RLI Corp, with RLI Ins. as the first-level, or principal, insurance company. At the holding company (RLI Corp.) level, we rely largely on dividends from our insurance 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 June 30, 2026, our holding company had $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 $191 million in liquid assets. Unrestricted funds at the holding company are available to fund debt interest, general corporate obligations and dividend payments to our shareholders. If necessary, the holding company also has other potential
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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 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 the first six months of 2026, RLI Ins. paid $119 million in ordinary dividends to RLI Corp. In 2025, RLI Ins. paid ordinary dividends totaling $139 million. Any dividend distribution in excess of the ordinary dividend limits is deemed extraordinary and requires prior approval from the Illinois Department of Insurance (IDOI). In 2025, our principal insurance subsidiary sought and received regulatory approval prior to the payment of extraordinary dividends totaling $151 million. As of June 30, 2026, $10 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 $190 million in ordinary dividend capacity will be available over the remainder 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.
Item 3.Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes to our exposure to market risk from that reported in our 2025 Annual Report on Form 10-K.
Historically, our primary market risks have been equity price risk associated with investments in equity securities and interest rate risk associated with investments in fixed income securities. We have consistently invested in high credit quality, investment grade securities. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” of our 2025 Annual Report on Form 10-K for more information.
Item 4.Controls and Procedures
We maintain a system of controls and procedures designed to provide reasonable assurance as to the reliability of the financial statements and other disclosures included in this report, as well as to safeguard assets from unauthorized use or disposition. An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures was performed, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective, as of the end of the period covered by this report.
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired control objective, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. We believe that our disclosure controls and procedures provide such reasonable assurance.
No changes were made to our internal control over financial reporting during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1.Legal Proceedings – There were no material changes to report.
Item 1A. Risk Factors – There were no material changes to report.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
On May 14, 2026, the Company’s Board of Directors authorized a share repurchase program of up to $250 million of the Company’s outstanding common stock. The following table details the repurchases of the Company’s common stock during the three months ended June 30, 2026.
| | | | | | | | | | |
| |
| | | | | | | Approximate Dollar Value of | |
| | | | | | | Total Number of Shares | | Shares that May Yet be | |
| | Total Number of | | Average Price | | Purchased as Part of | | Purchased Under the Plan | ||
Period | | Shares Purchased | | Paid per Share | | Publicly Announced Plan | | ($ in thousands) | ||
April 1, 2026 - April 30, 2026 | | - | | $ | - | | - | | $ | 250,000 |
May 1, 2026 - May 31, 2026 | | - | | $ | - | | - | | $ | 250,000 |
June 1, 2026 - June 30, 2026 | | 234,973 | | $ | 51.25 | | 234,973 | | $ | 238,000 |
Total | | 234,973 | | | | | 234,973 | | | |
Item 3.Defaults Upon Senior Securities - Not applicable.
Item 4.Mine Safety Disclosures - Not applicable.
Item 5.Other Information –
Securities Trading Plans of Executive Officers and Directors
Rule 10b5-1 under the Exchange Act provides an affirmative defense that enables prearranged transactions in Company securities in a manner that avoids concerns about initiating transactions at a future date while possibly in possession of material nonpublic information.
During the three months ended June 30, 2026,
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Item 6.Exhibits
Exhibit | | | | Incorporated by Reference | | Filed or Furnished | |
Number | | Description of Document | | Form | Filing Date | | Herewith |
| | | | | | | |
31.1 | | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | | | | X |
| | | | | | | |
31.2 | | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | | | | X |
| | | | | | | |
32.1 | | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | | | | X |
| | | | | | | |
32.2 | | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | | | | X |
| | | | | | | |
101.INS | | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | | | | | X |
| | | | | | | |
101.SCH | | Inline XBRL Taxonomy Extension Schema | | | | | X |
| | | | | | | |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase | | | | | X |
| | | | | | | |
101.DEF | | Inline XBRL Taxonomy Definition Linkbase | | | | | X |
| | | | | | | |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase | | | | | X |
| | | | | | | |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase | | | | | X |
| | | | | | | |
104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | | | | | X |
* Management contract or compensatory plan
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | |
| | RLI Corp. |
| | |
| | |
| | /s/ Aaron P. Diefenthaler |
| | Aaron P. Diefenthaler |
| | Chief Financial Officer |
| | (Principal Financial and Chief Accounting Officer) |
| | |
Date: July 24, 2026 | | |
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