RLI’s third quarter performance was positively received by the market, as the company delivered strong underwriting profitability and significant margin expansion despite modest revenue contraction. Management attributed the results to disciplined underwriting, a benign hurricane season, and favorable reserve development across all segments. CEO Craig Kliethermes emphasized, “Book value per share has grown 26% year to date inclusive of dividends on an 84 combined ratio and double-digit growth in net investment income, resulting in a 20% plus return on equity.” RLI’s casualty segment continued to grow even as the property segment faced increased competition and rate pressure.
Is now the time to buy RLI? Find out in our full research report (it’s free for active Edge members).
RLI (RLI) Q3 CY2025 Highlights:
- Revenue: $509.3 million vs analyst estimates of $453 million (8.4% year-on-year growth, 12.4% beat)
- Adjusted EPS: $0.83 vs analyst estimates of $0.70 (19% beat)
- Adjusted Operating Income: $95.41 million (18.7% margin, 32.9% year-on-year growth)
- Operating Margin: 31.8%, up from 25.8% in the same quarter last year
- Market Capitalization: $5.63 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From RLI’s Q3 Earnings Call
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Michael Phillips (Oppenheimer): Asked about the impact of higher personal umbrella attachment points on margins and loss trends. Chief Operating Officer Jennifer Leigh Klobnak noted early indications of improved loss trends from this change, with more experienced claims handling and better risk selection.
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Mark Hughes (Travist): Inquired about whether higher expense ratios in surety would persist. Chief Financial Officer Todd Wayne Bryant explained that increased technology and personnel investments are expected to continue, with the goal of leveraging these for greater premium growth over time.
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Mark Hughes (Travist): Also explored the outlook for competition in property markets. Klobnak described ongoing softening conditions, with more capacity entering, but stressed RLI’s focus on maintaining adequate pricing and strong producer relationships.
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Jamie Inglis (Fido Smith): Questioned the drivers of rising acquisition costs and how RLI maintains its competitive advantage in surety. Bryant and Klobnak cited the mix of business, higher commission rates in growing lines, and ongoing service and technology enhancements as differentiators.
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Andrew Anderson (Jefferies): Sought clarification on casualty loss ratios and transportation book dynamics. Klobnak attributed improvements to better risk selection and cancellations of large accounts seeking lower-cost alternatives, with continued focus on underwriting discipline.
Catalysts in Upcoming Quarters
In upcoming quarters, the StockStory team will be watching (1) the impact of continued rate actions and new state filings on retention and premium growth, (2) how investments in automation and generative AI translate into improved underwriting and claims efficiency, and (3) whether RLI’s selective approach in competitive markets enables it to capture profitable opportunities without sacrificing margins. Signs of stabilization or improvement in construction and property markets will also be closely monitored.
RLI currently trades at $61.30, up from $59.63 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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