RLI Corp (RLI) Q4 2025 Earnings Call Transcript

RLI Corp (NYSE: RLI) Q4 2025 Earnings Call dated Jan. 22, 2026

Corporate Participants:

Craig Kliethermes — President & Chief Executive Officer

Aaron Diefenthaler — Chief Financial Officer

Jen Klobnak — Chief Operating Officer

Analysts:

Michael Phillips — Analyst

Hristian Getsov — Analyst

Andrew Andersen — Analyst

Mark Hughes — Analyst

Meyer Shields — Analyst

James Inglis — Analyst

Mitchell Rubin — Analyst

Presentation:

operator

Good morning and welcome to the RLI Corp. Fourth Quarter Earnings Teleconference. After Management’s prepared remarks, we will open the conference up for questions and answers. Before we get started, let me remind everyone that through the course of the teleconference, RLI Management may make comments that reflect their intentions, beliefs and expectations for the future. As always, these forward looking statements are subject to certain factors and uncertainties which could cause actual results to differ materially. Please refer to the risk factors described in the Company’s various SEC filings, including in the Annual report on Form 10K, as supplemented in Forms 10Q, all of which should be reviewed carefully.

The Company has filed a Form 8K with the securities and Exchange Commission that contains the press release announcing fourth quarter results. During the call, RLI Management may refer to operating earnings and earnings per share from operations, which are non GAAP measures of financial results. RLI’s operating earnings and earnings per share from operations consist of net earnings after the elimination of after tax realized gains or losses and after tax unrealized gains or losses on equity securities. Additionally, equity and earnings of unconsolidated investees and related taxes were removed from operating earnings and operating EPS to present a consistent approach in excluding all unrealized changes in value from equity investments.

RLI’s management believes these measures are useful in gauging core operating performance across reporting periods, but may not be comparable to other companies Definitions of operating earnings the Form 8K contains a reconciliation between operating earnings and net earnings. The Form 8K and press release are available at the company’s website@www.rlicorp.com.

I will now turn the conference over to RLI’s President and Chief Executive Officer, Mr. Craig Clithermes. Please go ahead.

Craig Kliethermes — President & Chief Executive Officer

Good morning everyone. We appreciate you being with us today and I’d like to introduce Aaron Diepenthaler, our Chief Financial Officer, and Jen Klobnock, our Chief Operating Office, who are joining me. I’ll start by saying we feel very good about where RLI is today and just as importantly, where we’re headed. 2025 was another strong year for our company. We delivered underwriting income of $264 million on an 84 combined ratio, grew book value per share by 33% inclusive of dividends, and achieved our 30th consecutive year of underwriting profitability. That kind of consistency is extremely rare in our industry and it certainly doesn’t happen by accident.

It’s too long to be considered a hot streak. It reflects disciplined execution over time and the principles we work to uphold every day. The environment remains competitive and premium growth was modest. But that’s exactly when our model tends to show its strength. We don’t measure success by how fast we grow. We measure it by how well we grow and whether today’s decisions stand the test of time. Jerry Stevens, our founder, used to remind us that you don’t win the long game by swinging at every pitch. You win it by knowing which ones to let go by.

That mindset is deeply ingrained at roi. We’re comfortable pulling back when the risk reward equation doesn’t work, and we’re confident leaning in where we have the expertise and when the market supports it. Our diversified specialty portfolio, strong balance sheet and ownership culture give us a lot of flexibility and a lot of confidence as we look ahead. We’re well positioned and optimistic about the opportunities in front of us.

And with that, I’ll turn it over to Aaron to walk through the financials in more detail.

Aaron Diefenthaler — Chief Financial Officer

Thanks, Craig, and good morning everyone. Yesterday we reported fourth quarter operating earnings of $0.94 per share, up from $0.52 in the year ago period. Better underwriting performance, minimal storm activity, and increases in investment income drove most of the improvement compared to last year’s. For the quarter, we generated $71 million of underwriting income on an 82.6 combined ratio versus 22 million on a 94.4 combined ratio in Q4 last year. For the full year, we delivered 264 million of underwriting income on, as Craig mentioned, an 83.6 combined ratio, marking our 30th consecutive year of underwriting profit. I wanted to call your attention to a change we made to our definition of operating earnings as referenced in a footnote on page one of our release and in the non GAAP disclosures on page two.

Operating earnings now excludes equity and earnings of unconsolidated investees and related taxes. Prior periods were recast to conform to that definition for comparability. Currently, unconsolidated investees only includes our minority investment in prime holdings. We believe excluding these investments from operating Earnings Better reflects RLI’s core operations, where we maintain full operational control and aligns the treatment of investee results with other equity investments. On a GAAP basis, net earnings were $0.99 in the quarter and $4.37 for the year, an increase of 17% over full year 2024. In addition to operating earnings, net earnings include net realized gains and losses, net unrealized gains and losses from equity securities, and now earnings of unconsolidated investees from Prime.

Our Q4 net earnings reflect Prime’s core operating results based on our minority ownership and a reduction to Prime’s value on our balance sheet to $53 million. Turning to premium, top line growth was down 2% for Q4 and up 1% for the full year as competitive dynamics necessitated heightened discipline in several businesses while other products continued to find opportunities. Property premium was down 11% during the quarter, consistent with the rate environment for catastrophe exposed commercial property, although other parts of the segment, marine and Hawaii homeowners continued to grow. Property’s underwriting profitability was supported by 17 million of favorable loss emergence on prior year’s catastrophes, modestly offset by 4 million storm activity in the quarter inclusive of these net benefits.

Property’s combined ratio was 49.2 in Q4 and 57.2 on the year. Casualty premium was up 2% in the quarter and 7% on the year with strong contributions from Personal Umbrella. The bottom line for casualty benefited from 4 million of favorable prior years loss development. Just under 2 million of this release was related to prior year catastrophe activity. Surety premium remains flat in the current period and up slightly on a year to date basis. The segment’s quarterly underwriting results included 2.7 of favorable loss emergence from prior years, which improved surety’s loss ratio by 7 points in the quarter.

On the expense ratio, Q4 came in at 39.3, up from 37.6 a year ago. Bonus and profit sharing expenses were higher on strong results and business level expenses were up as we’ve continued to invest in people and technology. On the investment side, net investment income increased 9% in the quarter and the portfolio generated 1.5% total return in Q4 and 9% for the year. The yield environment has been relatively stable for intermediate maturities and we continue to find accretive fixed income opportunities. Purchase yields averaged 4.9% in the quarter, which was 70 basis points above our book yield.

Putting it all Together, we produced $5.29 of comprehensive earnings for the year, driving 33% growth in book value per share inclusive of dividends. This level of generated capital again allowed for a special dividend to shareholders of $2 per share in addition to our ordinary fourth quarter dividend. Overall a solidly profitable championship caliber close to 2025.

With that, I’ll turn it over to Jen for more color on market conditions.

Jen Klobnak — Chief Operating Officer

Thank you Aaron. I will dive right into our segment starting with Property. While premiums declined 11% in the fourth quarter, our property team delivered an excellent 49 combined ratio underscoring the quality of our portfolio and ability to execute ENS property premiums decreased by 18% amid intense competition from other carriers and MGAs along with increased risk retention in some areas by insured. Hurricane rates were down 15% while submissions continued to grow as insurance shaft the best terms. We are seeing pressure on terms and conditions and our underwriters are flexing selectively to retain high quality accounts. This competitive dynamic extends to other property lines as well.

Earthquake rates declined 12% as insured sought weight relief or decided to retain the risk. We see carrier competitors in the ENS property market slowly giving back terms and conditions while MGAs are being more aggressive. Despite the rate moderation on catastrophe coverages, we continue to achieve returns on retained business that exceed our long term targets. Our experienced ENS property team delivered a meaningful underwriting process despite challenging market conditions. They have navigated many hard and soft market cycles with discipline and remain focused on securing terms and conditions at an appropriate rate while reducing uncertainty when a loss occurs.

Hawaii homeowners premium grew 5% in the quarter supported by a 16% rate increase. For the year, premium was up 26% due in part to a couple of book rollovers we assumed following the Maui wildfires. We will continue to seek growth in this profitable book through our outstanding local customer service, investments in customer experiences and additional rate increases from recent filing approval. Marine premium was up 2% in the quarter. Our diverse portfolio is evolving based on market opportunities. Inland marine continues to grow through strategic talent additions and new product adjacencies. Ocean Marine remains competitive, particularly in cargo where we have pulled back.

Our underwriting teams continue to apply patience and discipline which resulted in underwriting profit across both inland and Ocean. In 2025, surety premium was flat but produced a strong 80 combined ratio. In the fourth quarter. Transactional surety grew 4% through continuous marketing efforts and investments in our distribution capabilities. These are very small premium bonds, so it takes significant volume to move the needle. Commercial surety also grew 4% as our talented team secured new accounts by closely engaging with our distribution partners. Increased customer bond requests offset the slowdown in renewable energy with both trends driven by government policy on the contract.

Surety side premium declined 5% as we navigated the ending to a year that included multiple fits and starts in construction spending. We know that infrastructure investments are needed at the federal, state and local level and we remain well positioned to support that business as public funding increases. Our surety underwriting teams remain committed to underwriting discipline and prudent risk selection in this evolving environment. The casualty segment premium grew 2% on a 99.6 combined ratio for the fourth quarter, personal umbrella led the way with premium growth of 24%. This included a 12% rate increase and we secured additional approvals that will further add rate to the book in 2026.

This controlled growth reflects reduced new business in several challenging states where we have taken larger rate increases, required higher underwriting, I’m sorry underlying limits and worked with our distribution partners to improve the quality of our book. The first umbrella market continues to present opportunities as our competitors responded to deteriorating results by adjusting their appetite and terms of emissions. Our continuous product collaboration supported by extensive data mining, actuarial analysis and claim trend identification produced an underwriting profit for the year. Transportation premium declined 10% in the quarter despite a 13% increase in rates as we continue to prioritize profitability over volume in a highly competitive environment.

Severity trends and economic pressures have reshaped the market with heightened volatility and increased expenses forcing some transportation companies to consolidate or close reducing the demand for insurance. At the same time, despite some insurance providers leaving this space due to poor financial performance, there always seem to be new markets entering and pushing for growth. Acute pressure on the largest sized accounts has led to a decrease in our average account size over the last two years. Our in house loss control team provides an advantage as they assess and try to improve the safety of our insured which helps all drivers.

Our underwriters are empowered to make bottom line driven decisions. We remain disciplined pushing for more rate and walking away from underpriced accounts. Our executive products group achieved an underwriting profit again this year. Printing in the fourth quarter was down 2% with rates down 1%. The market is stabilizing amid broader industry loss development. Our focus remains on marketing to increase access to business and disciplined risk selection to maintain our quality book. The ENS casualty team also produced an underwriting profit for the year. We saw increased competition in the fourth quarter particularly on larger six figure premium accounts due to some partners chasing top line growth presumably to meet year end goals.

Our primary excess liability premiums declined 8% in the quarter but full year premiums finished up 10%. Competition varied by region with some markets exiting while others leaned in. Submissions increased by double digits and we are constantly engaging producers to see the best new business opportunities. Much of our business is construction related and projects are taking longer to bind. We have many quotes outstanding waiting for permitting or funding. The group knows that words matter and have not relaxed terms and conditions. Despite competitive pressure, we continue to provide a stable solution for our business partners in the construction space.

Before I provide perspective on the full year, I’ll update you on our reinsurance renewals. On January 1, we renewed about two thirds of our annual reinsurance spend. It was a buyer’s market for property. We secured 15 to 20% rate decreases on our catastrophe program and more modest relief on our property working layers. With our reduced exposure and continuing soft market conditions, we purchased 150 million less catastrophe limit for 2026, but we remain ready to approach the market midterm should an opportunity present itself as we have done in previous years. On the casualty side, rates were down around 5%.

We achieved similar terms and conditions with some broadening of coverage in the property treaties. For the full year we achieved modest growth while producing an 84 combined ratio while ENS Property prudently contracted in response to softening market conditions. Other teams capitalized on opportunities, most notably Personal umbrella, ENS Casualty and Hawaii Homeowners. We pushed for rate change where we needed it, achieving an overall 16% rate increase in auto liability coverages across our portfolio in 2025. We also spent time with our distribution partners broadening and deepening those relationships and we invested in operational efficiencies. This included simplifying and automating processes, developing new capabilities to improve ease of doing business, and investing in our data infrastructure to support granular real time decision making.

Internally, we brought our teams together regularly to talk about how we are doing and where we can improve. These actions position us well for another successful year in 2026. In a more challenging environment, capital discipline and alignment of interests differentiate successful insurers. Underwriting, which we define as underwriters, claims and analytics. Collaborating to evolve our products is the disciplined pursuit of opportunity. We are an underwriting company as evidenced by our unmatched track record of 30 consecutive years of underwriting profit. I am incredibly proud of our entire team for producing these results and for how they do it by taking care of our customers and striving to improve every day because they are owners.

With that, I will turn the call over to the moderator to open it up for questions.

Questions and Answers:

operator

Thank you very much. The question and answer session will begin at this time. If you are using a speakerphone, please pick up the handset before pressing any numbers. If you would like to ask a question, please press star1 on your telephone keypad to withdraw your question, press star1 again. Please stand by for your first question. Your first question comes from Michael Phillips with Oppenheimer. Your line is open.

Michael Phillips

The accidental loss ratio in Casualty improved. A bit from last year. Once you back out that reserve addition you did. Can you talk about how much of that was because the mix shift from your pulling away from transportation book versus. Anything else that might have caused that improvement.

Jen Klobnak

So as you look at the casualty loss ratio, you did see improvement and we did pull back in both transportation and other areas of auto where we provide coverage like in our package businesses last year in the fourth quarter we did recognize additional reserving related to those those auto related coverages both in our transportation and our first umbrella product this year. As we looked at losses coming in, we did not see the need to take such action. And so you just see that improvement. I can’t quantify specifically the difference. Aaron.

Aaron Diefenthaler

Yeah, I think the bulk there on a comparative basis to Q4 of last year that you’re seeing is the action we took for the full accident year in 2024 around auto related exposures. Also true of the 2023 accident years as well. So we feel we’re on more stable footing around those exposures because we didn’t take the same level of action in the current accident year, still cautious around auto related exposures. And you know our incentive structure is. Set up for those business leaders to. Pull back from those markets when they see underpriced exposure competition coming to bear on submission activity. So you know, everything is set up for there to be a natural pullback for markets that are, that are underpriced. But the underlying results themselves that we’re seeing we feel better about because of the stability relative to the action we took the last couple of years.

Michael Phillips

Okay, thanks I guess on that last year’s reserve addition, I mean I think. It was from higher severity and umbrella and transportation. And this year you’ve seen a bit of a, in casualty, a bit of a slowdown in favorable pyd. I assume that means you’re still seeing. That same level of severity that you that caused you to take those reserve additions last year. I guess the question would be I’m not sure how much that reserve addition was because of the accounts that you’ve now subsequently lost from midterm cancellations that you’ve talked about last quarter. But to the extent some of that. Was and those accounts are no longer. Here, I guess what does that mean for any potential favorable development if those accounts are no longer here, I guess going forward?

Aaron Diefenthaler

Yeah, well, it’s hard to get down to the account level when you’re examining these things, but I’ll just say overall you’re right to identify lower levels of favorable development for casualty here in the fourth Quarter. I think you do have to right size that for a small proportion of the prior year CAT activity as well to get closer to $4 million number that I referenced. However, just overall we’re seeing lower levels of favorable development out of casualty.

We’re still seeing drivers out of GL and commercial excess and still, you know, some challenges around auto related exposures. All of that being maybe to a lesser extent than what we saw in, in the year ago, period.

Jen Klobnak

Yeah. To supplement that, I would just add that, you know, there are many metrics that you can track to see what direction you’re headed and I’ll tell you that. Oh, that new claim counts in 2025 were down significantly in those auto spots. So for example, our transportation division, new claim counts were down 24% for the year, which is a positive indicator that the actions we’re taking are going to translate into a more stable going forward.

Michael Phillips

Yeah, okay, perfect. That’s helpful, Jen. Thank you, both of you. Thank you. I guess just switching gears. Last question. On the property side, I mean, last target market, you talked a lot about how you kind of leaned in and made some investments there as you were. Growing in that hard market. What does that mean today given just the opposite? Is there any, I guess lack of a better term fat there on the property side that may need to be trimmed as there’s pressure on your expense ratio in property over the next year or so?

Jen Klobnak

Well, that’s an interesting question. I would say the one thing we did do to ramp up in addition to trying to be more efficient to handle more submissions, is that we added additional talent. We’ve had some very experienced underwriters that have really enjoyed this hard market and I think as they come towards the end of their career, not that I’m encouraging anyone listening to retire, but I think we will see a handful of retirements in that space and now we’ll be ready as we’ve already started training the next generation in that group. In addition to that though, I will tell you our submission count is still up.

We continue to see growth in submissions throughout that property book and we do want to look at that business. So, you know, it’s harder to work now. There’s just as much work, if not more, despite the fact that terms and conditions are more challenging. So you can’t necessarily shortcut that. You do want to support the producers that are sending your business. So there’s, there’s a little bit of, you know, we still need to keep investing in supporting that.

Michael Phillips

Okay, thank you, Jen for the answers. Appreciate It.

operator

Thank you very much. Our next question comes from Christian Getsoff with Wells Fargo. Your line, your line is unmuted.

Hristian Getsov

Thank you. Good morning. On the property competition, I guess what needs to happen in the market for us to see an inflection and the rate decreases at least like moderate from here. Is it like thinking about, is it simple as a large outsized cat event, call it north of 50 billion. And then I guess on the competitive dynamics you’re seeing in the space, like how much of that competition would you classify as being irrational in pricing versus a more rational normalization of the cycle given the strong rate increases in profitability we’ve seen in the line.

Jen Klobnak

Well, this is Jen. I think what we need is a little bit less capacity and whatever can cause that to happen would be beneficial to the market. So whether that’s an incredible cat event, whether that’s a change in the investment opportunities to shift to a better opportunity in the, in the greater space, anything of that nature that would reduce capacity would be beneficial. Having said that, you know, all we need is a stable market. I will tell you that the current catastrophe market is well priced with reasonable terms and conditions in a lot of places.

So we can navigate this market easily. If it would stay where it’s at now with reinsurance renewals being a little more friendly on one one, you know, it could soften further. And so again, looking for either a large cab or some other event that would take capacity out of the market would be beneficial. I can’t quantify how many are reasonable or unreasonable. As we are navigating that market every day, responding to our producers, we see business being stolen between producers. There’s a lot of movement going on just because people have changed which, which wholesalers they work for.

So that’s one factor. But we also see carriers that have aligned interests being responsible. And so we don’t mind competing against those people. That’s a fair, fair playground. It’s where capital providers that don’t have aligned interest, they, you know, the MGAs in some cases have no downside. It’s not aligned with the carriers who have to pay those claims at some point. That’s where there’s a disconnect and where the MGA’s want to use up that capacity quickly because right now the market could be better than it is a few months from now. So I don’t know how much of that market there is.

I can tell you there are examples where people have received capacity for this year. There are multiples and multiples of what they were Able to provide in terms of capacity last year. So, you know, we just know that we can’t compete on some of that. So we don’t spend a lot of time on those types of deals. We kind of move in the spaces where we know we have a chance at the business.

Hristian Getsov

Got it. Thank you for all the color. And then switching to personal umbrella. Are you seeing a shift in the competitive dynamics there? Just given we’re seeing more of a focus on growth from some of the bigger personal line carriers and mutuals. I’m trying to get a sense of the ability to compete as a monoline provider becomes more challenging given a lot of these other players are focused on bundling, which would include personal umbrel. Thank you.

Jen Klobnak

Yeah, I’m a fan of the bundle Ruski commercial. But other than that, I would say the first umbrella market continues to evolve. Some of those personal lines carriers that bundle their business, I know, are increasing rates tremendously, changing their coverage. You see that in filings, you see that in the press. And we do partner with some of those same carriers to offer our crystal problem and it doesn’t match their appetite. We have a pretty wide moat around our business. We’re pretty embedded with our business partners. They find value in our product and in how we support that product through servicing.

So we, you know, we update our information daily on what kind of business we’re getting in the door. We’re talking to our producer partners monthly to see, you know, what they need and how we can service that business. So I feel pretty good that we have a. A good base to go from a position of strength going into the next year. We’re also still getting some rate increases in various states where we need some rate. And so I see opportunity for growth from both rate, but also from our continued great service that we provide to our producers.

I think we’ll have more opportunity there. So while there’s a, you know, there’s some more competition coming in on the edges, I think people might be noticing that we do a pretty good job of this. There’s some people talking about getting in. We’re going to defend our space. We’re going to continue to evolve this product and offer a quality product to insurers out there who need this coverage.

Hristian Getsov

Got it. And if I could sneak one more. Have you seen any benefit on submission volumes from the elimination of the Diligent search documentation requirement for surplus lines in Florida? I know that’s a pretty good portion of your premium mix and I just wanted to see if there’s any Updated thoughts there. And then also if you have any updated thoughts around the general tort reform we’ve seen not only in Florida, but, you know, in states like Georgia on las fronts. Thank you.

Jen Klobnak

I’ll tell you that in Florida in the last year, we have actually tried to slow our dividends a little bit, given the severity that we were seeing previously. And we just talked about our actions from last fourth quarter, for example. And so with some of the actions we’ve taken between raise attachment points and curtailing some of the production we want from certain producers, we haven’t really seen an impact from that specific regulation just because we’re more controlling our growth at this point in that state. On the other side of it, obediatory form has been a positive.

We don’t necessarily have a number we can point to, but we do see on individual cases where we have a more reasonable resolution because we can present, you know, actual medical costs, what people pay. Just the things that we can do to fight the plaintiff’s attorneys and their playbook create a more fair playing field there to resolve claims fairly for that insured who has an actual loss. We’re willing to pay for that loss. We just don’t want to pay the attorneys as much. And so that environment has changed and has improved. And we’ll probably see that in other states.

You know, it’s a little more early, like for Georgia, for example, but some of the things they have passed have been favorable as well. And in addition to that, all of that third party litigation, there’s a lot of states now that have started passing legislation to get those kind of arrangements disclosed and that kind of thing, which will also help both in person umbrella as well as broader auto cover.

Hristian Getsov

Thank you.

operator

Thank you very much. Your next question comes from Andrew Anderson with Jefferies. Your line is open.

Andrew Andersen

Hey, good morning. Recognizing really strong overall results and a very good long term track record here. If we just kind of focus on casualty. Over the last two years, 98 reported a combined ratio. A little bit uncharacteristic to have that two years in a row. And you know, I realize there are some headwinds on, on trucking, both on the reserving side and on the premium side. But do you feel that some of these headwinds within this casualty segment are behind you or have really worked their way through and you’re kind of entering 26 in a better position both from a booking ratio and from any premium growth headwind into next year?

Aaron Diefenthaler

Well, Andrew, I think, you know, as we’ve characterized the product level rate Increases we’ve gotten within the casualty segment, we think that’s probably strongest foundation we can offer in terms of data itself. You know, we, we feel better about where the overall rate level is for a lot of these businesses that have had some challenges related to them. So, you know, it’s hard to say, you know, the exact point in time where you, you turn the corner into something that may offer some additional potential for expanded margins. But having that rate profile and having some compounding of those rates over multiple years, we think is a good foundation.

Jen Klobnak

Yeah. In addition to that, I would say we have clearly slowed a bit releasing reserves for some of those coverages. I mean, we’ve talked about that in the past too. Initial booking ratios tend to hold up a little longer. While we may be seeing positive signs like claim counts that I look at, you know, we’re not acting. We tend to be pessimists, so we don’t tend to act on the good news. We tend to wait and make sure that we are seeing enough good news for a while. That becomes a trend before we’re going to recognize it for sure.

Craig Kliethermes

Andrew, I grew up in the show me state of Missouri, so we got to wait and see on good news. We’re slower to usually recognize that, but if we see something going the other direction, we obviously like to try to get that up as quickly as possible. So. So that’s the way we look at things.

Andrew Andersen

Understood. And on the property side, you’ve talked quite a bit about the MGA market being aggressive there. How would you characterize kind of more of the traditional or admitted carriers?

Jen Klobnak

Well, I would say that everybody wants premium, so it’s a fight out there. But I would say the other ENS carriers are fairly responsible. I’ll give them credit. And so we don’t, again, we don’t mind competing against them. I think if we could just reduce the little capacity in that market, it could, you know, it would at least stabilize, which would be great.

Andrew Andersen

Thanks. And then maybe last one, I think I heard 5% for Hawaii home. Is that just reflective of. We’ve lapped kind of the book rolls here because it’s quite a decel quarter over quarter.

Jen Klobnak

Yeah, that’s correct. We had a couple of book rolls that ended right at the end of the third quarter. And so, you know, now we’re back to our outstanding local service and just competing on a regular basis at this point. In addition to getting rate, we have gotten rate increases that’ll drive a little bit of growth as well.

Andrew Andersen

Thank you.

operator

Thank you very much. Your next question comes with Mark Hughes with Truist. Your line is open.

Mark Hughes

Yeah, thank you very much. Good morning. Any granularity you can provide on that property dynamic? Just in terms of the competitive pressure, as you think about Q4 relative to Q3 or even through the quarter, kind of the monthly pressure, I know it’s certainly more challenging year over year, but has it stabilized at all or is it still under incremental pressure?

Jen Klobnak

That’s a tough question. You’re getting pretty granular, I would say. You know, every month we, obviously, we look at it on a very regular basis. And each month we, you know, if it’s good news, we hope it begins to trend, if it’s down or, oh, you know, what’s going on. So I, I don’t, I don’t know that I should provide color on a monthly basis. I’ll tell you that in the fourth quarter, you know, that’s the smallest quarter for renewals. I mean, there’s just not as many renew dates out there. So it’s a tough quarter to really conclude about anything.

11 is a big date. And then in the spring, 415-1617, all those are bigger dates. And that’s really where you make your book of business. So all of that is coming up and I think providing anyone one color on renewals, probably providing a little too much information. So the market is still competitive? It continues to be, and we will see how that plays out this year.

Mark Hughes

Yeah, thank you for that. And then the thinking about the lower reinsurance costs, would you say pricing was already incorporating that? There seemed to be a pretty wide expectation for 10 to 20% decline. Just thinking about whether, when that actually happens, does that mean much for the market in the near term?

Jen Klobnak

Well, as we prepared for our 1:1 renewals, we did contemplate a bit of a decrease in our costs. And so we built that into our benchmark pricing, which indicates, you know, how we need to price the business. I don’t know what other companies do. I will tell you that last year, in 2025, January, we didn’t really see an impact from the reinsurance renewals, but in February, we noticed that that’s when all of that information trickled down to the underwriter desk and people got more aggressive because they did get released last year on one on one.

So, you know, January, we’re just going to put it in the books and we’ll see if the behavior changes later this spring to incorporate that. We also see changes on 4:1, you know, because that’s when some MGA relationships renew their capacity. And so we may see further change of behavior at that point in time, but that’s yet to be determined.

Mark Hughes

And then one quick one, if I might. You’d mentioned that you were seeking additional rate increases in personal umbrella and that would help 2026. Can you guise that?

Jen Klobnak

Well, you know, this is a 50 state product where we have to file in each state and each state has a different process. So I can tell you that effective December 1st, we did get a California rate increase about 20%. And so that will bleed into part of the book. California is one of our bigger states. I can tell you our process is that every quarter. And now that we have year end, it would be nice to again look at results to see which states require rate. Where are we not getting adequate rate and where are we? Those analyses are underway already.

And so we’ll conclude in the next couple weeks if we need to start taking additional action. But just based on the filings that were approved in the second half of last year, we know that there will be a pretty good amount of rate going into the book this year as well.

Mark Hughes

Thank you very much.

Craig Kliethermes

Thank you.

operator

Thank you. Our next question comes from Meyer Shields with Keefe Brereton Woods. Your line is open.

Meyer Shields

Great. Thanks so much, Jen. When you talk about lower auto claim emergence, is that across accident years or is that an accident year 2025 comment?

Jen Klobnak

These are just new claims that are received in 2025. They could be related to 2025 accident year or previous accident years.

Meyer Shields

Okay, thank you.

Craig Kliethermes

I was just going to say I think we did see a reduction last year as well though. So two years in a row.

Meyer Shields

Okay, all makes sense. I just want to make sure that it was understanding that correctly. The $150 million catastrophe reinsurance limit reduction, was that at the top end of the tower? Did your attachment point change at all because of the smaller book?

Jen Klobnak

No. So we maintained our 50 million attachment on the Cat Tower and just brought that tower down.

Meyer Shields

Okay. And then final question just you mentioned, you know, I guess, concerns about competitors seeking to meet their budgets. How significant is maybe fourth quarter competition compared to other quarters? I’ve heard the comments a lot. I’m just trying to get a sense of how material you think it is in the market.

Jen Klobnak

I mean, overall, the fourth quarter is always challenging and our underwriters will always say, oh, other people. And it’s legitimate. Other people are compensated on top line directly. Sometimes not even compensate on bottom line. It’s just strictly top line. So you do see A rush to meet people’s bonuses. But I argue with them that that happens every year. So the real test is, is it worse this year in the fourth quarter versus last year? Fourth quarter, the sprint to the finish. And in some of our segments, I would say people have this feeling it’s worse, but it is a lot of feeling as opposed to something you can measure to some extent that’s offset by, in some cases, like in property, where we have just less business that renews. So you can’t really measure what’s going on as well as other quarters where there’s just more business available.

Meyer Shields

Okay. No, that makes sense, I guess. You know, the question for me is always, is the first quarter so far less competitive than the fourth quarter that just ended?

Jen Klobnak

Sorry, I didn’t follow that.

Meyer Shields

Oh. I’m just asking whether some of that. Competitive pressure has abated in the first quarter because right now people aren’t as worried about 2026 premium budgets. I know it’s early in the first quarter to even ask.

Jen Klobnak

Well, it’s too early to ask. Yeah, we haven’t closed January yet, so it’s hard to see. I see a partial month is all I have right now.

Meyer Shields

Fair enough. Okay, thanks so. Much.

operator

Thank you. Your next question comes from the line of Carol Brazes with Philo Smith and company.

James Inglis

Sorry, it’s Jamie Inglis. Hey, guys. Great quarter and year, but I’ve got. A question about the reserve development. If you look at the 24 and. Prior cat events, there was a big. Swing in both the quarter and the year. And I’m wondering, is that sort of. The, you know, a normal thing? Time to figure out what the, you. Know, what the cats actually ended up. As, or is there something specific or unusual in there?

Aaron Diefenthaler

Not unusual. Jamie, this is Aaron. You know, you think back to last year, we had a couple of sizable storms in Helene and Beryl. I think we outlined our expectations for there in our third quarter result and also at that time offered a range of potential loss activity around Hurricane Milton, which was early days in the fourth quarter of last year. We tightened up our expectations as of the fourth quarter release last year, but that was close to $50 million of an estimate just on Milton alone. And so you get a year on from those events and then some, and you have some more comfort around what actual losses are going to transpire.

And we felt it prudent to take down some of the ivnr. Those were not the only events that were incorporated in that analysis. You know, we have CAT activity going back over several years that we examined and you know, each storm stands unto itself and it’s a hand to hand combat in terms of examining claim activity, what’s outstanding, what may be in litigation, all fitting into our thinking on what to take down there.

James Inglis

Okay, great, that’s good. Thanks a lot.

Aaron Diefenthaler

Yeah, thank you. Jamie.

operator

Your next question comes from the line of Gregory Peters with Raymond James. Your line is open.

Mitchell Rubin

Hey, good morning guys. This is Mitch Rubin. Thanks for taking my call. You referenced a 13% rate increase in transportation this quarter. Is there any quantification you could provide on the magnitude of the underlying loss trend you’re seeing in the portfolio and what level of rate increases you believe might be required in 2026 to sustain rate adequacy in the book? Thanks.

Craig Kliethermes

Yeah, Mitch, this is Craig Cleveland. So I’ll, I’ll speak to that. So I mean we anticipate continue to try to get increases going forward, probably double digit increases. We have seen elevated severity trends in pretty much all auto businesses since COVID since the courts have opened back up. At some point we think that has to subside. I mean, people are going to want to continue to pay, you know, 10, 15% increases in their insurance or they can’t afford to pay 10, 15% increases in their insurance. So at some point there’s going to. Be a breaking point where they’re going. To get more tort reform in some of these states so that we can moderate this loss severity trend. In the meantime, you can expect us, I can’t speak for other companies, but you can speak us to try to at least get the increase to cover trend and if we can’t, we’ll get smaller. That’s just the way we operate. So we’re gonna try to continue to get, you know, 10, 15% increases on auto business going forward until we see that loss cost trends subside.

Mitchell Rubin

Great, thank you for the colleague, that’s very helpful. Can you provide any additional detail on how your technology investments over the past several years have impacted your underwriting performance, particularly touching on changes in submission to bond ratios within the transactional security business? Thanks.

Jen Klobnak

Well, I would say our investments in technology have done a couple of things and focused on a couple of things. One is really improving our customer experience and that starts actually before the technology. So considering, for example, what questions we ask, we tried to simplify it in a few places, the application questions that we’re asking, making them more straightforward. I don’t know about you, but whenever I get an application I struggle with how do you answer this question? So trying to simplify it based on feedback and input from our producer partners and insurers has been really critical then providing that through automation and modern systems which we’ve been upgrading over the last few years.

For example, insurity, we’re rolling out an upgrade to our current offering. We’ve been in that business since 1992. As you can imagine, you know that that technology has changed tremendously over the decades. And so our recent investment is rolling out to provide end to end ability to look at what’s going on with surety bonds by those producers so that they can service that business better without feeling like they’re bothering us to ask questions and whatnot. So that’ll be very helpful to them. So really kind of that customer experience and getting business in the door has been a big investment.

A second large bucket would be efficiencies. So there are a number of things we’ve done with efficiencies through various types of artificial intelligence and various types of other automation to try to just have people spend more time using their brains instead of doing administrative tasks. So that can include things like summarizing submission information, summarizing claims, lengthy claim information. It can mean inputting, you know, various emails that come in regarding claims, go straight into claim files so nobody has to look at them and decide where they go. Updating, you know, loss runs that come right in and go straight into our systems.

So things of that nature on efficiencies have been a big category. And then lastly, I would say is just that improving that feedback loop that we have between underwriting claim and analytics, you know, really getting our data in places where we can really look at it, slice and dice it very granularly. Having the ability to update that daily where it makes sense. Some business units that doesn’t make sense, we don’t need to invest in that. But in others there’s, there’s data available to drive decisions that we like it updated more often. So we’ve invested in that.

We’ve rolled out a number of dashboards to provide people insight into submission counts, binding percentages, as well as marrying that up with loss information. So which producers, which states, which types of business, which attributes of an insured derived loss activity. All of that information has been ramped up to help us make better decisions as we’re underwriting and handling claims. So those are kind of the three big buckets that we have focused on. And I would say, you know, given our diverse portfolio, you’re never done, but we have spent a lot of time and effort and I think we’re reaping the rewards in that we continue to make an underwriting profit which is in a more challenging environment as the market softens. We’ve got everything in place so that we can keep making great decisions for that Bottom.

Mitchell Rubin

Great. Thank you for the responses.

operator

There are no further questions at this time, so I’ll turn the conference over to Mr. Clithermis, RLI’s president and CEO, for some closing remarks.

Craig Kliethermes

Thank you. Before we wrap up, I want to take a minute to reflect on what this year, our 30th consecutive year of underwriting profitability, truly represents. Thirty years ago, RLI was a very different company. We wrote about $270 million of gross written premium. Roughly a third of our business was earthquake insurance. We were still in the contact lens business. Our market cap was under 200 million, and we were proud to make Ward’s top 50 performing insurance companies for the fifth straight year. For the record, 2025 represented our 35th consecutive year on that list. The world was a different place, too.

Public access to the Internet was just getting started with AOL and prodigy. The Sony PlayStation had just hit the market. Cell phones were used, for one thing, to make phone calls. A lot has changed over those 30 years, but the things that matter most to us haven’t. There are still no shortcuts in this business. Sustained success is built the same way it has always been, with discipline, accountability and a lot of hard work. What gives me the most confidence as we look forward is not just our results, but how we produce them. We have a strong balance sheet, a diversified portfolio, and a team of engaged employee owners who care deeply about the decisions they make and the outcomes they produce.

Every day they show up committed to making RLI a better company for its customers, their co workers and our shareholders. Our founder liked to say that great companies are built one good decision at a time and that those decisions never seem easy in the moment. That philosophy has served RLI well for three decades and it continues to guide us today. We’re proud of what we’ve accomplished, but we’re not done. We’re optimistic about the future, confident in our approach and committed to doing what we’ve always done staying disciplined, staying different, and playing the long game. I would be remiss to end without thanking Todd Bryant, our CFO who just retired at year end after 31 years of dedicated service to RLI.

I also want to thank our employee owners for their hard work and we appreciate you all for your continued interest in rli. We look forward to speaking with you again next quarter.

operator

That concludes today’s call. Thank you all for attending. You may now disconnect.