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RLI’s Q3 FY2026 revenue and adjusted earnings per share both beat the consensus. Revenue as counted for the consensus was $471.6 million, above the $466.6 million estimate, while adjusted EPS was $0.86 against an expected $0.58.
RLI reported quarterly revenue of $477.0 million, down from $509.3 million a year earlier, and diluted EPS of $0.88, down from $1.35. The company attributed the decline in net earnings primarily to lower realized gains and a shift from unrealized gains to unrealized losses on equity securities, partly offset by higher investment income.
The filing shows net premiums earned rose 4 percent, primarily because of casualty products. Gross premiums written increased in casualty, although the company said competition reduced premiums in general liability and commercial excess; property premiums declined as competition pressured commercial property pricing and renewals.
RLI reported underwriting income of $59 million on an 86.2 combined ratio, compared with $61 million on an 85.1 ratio a year earlier. Its gross margin fell to 29.7% from 37.8%, and operating margin fell to 22.5% from 30.8%. Free cash flow increased to $192.4 million from $177.8 million.
| Q3 FY2026 | Q3 FY2025 | Change | |
|---|---|---|---|
| Revenue | $477.0 million | $509.3 million | −6.34% |
| Diluted EPS | $0.88 | $1.35 | −34.8% |
| Gross margin | 29.7% | 37.8% | −8.1 percentage points |
| Operating margin | 22.5% | 30.8% | −8.3 percentage points |
| Free cash flow | $192.4 million | $177.8 million | 8.17% |
| Against the consensus | Reported | Consensus | Result |
|---|---|---|---|
| Adjusted EPS | $0.86 | $0.58 | Beat by 48.3% |
| Revenue | $471.6 million | $466.6 million | Beat by 1.07% |
Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.
What management said on the call
CEO Craig Kliethermes said RLI would continue to select risks carefully and pursue opportunities where its expertise makes a difference. He also said relationships with customers and distribution partners help the insurer earn opportunities.
In the Q&A, COO Jen Klobnak described increased competition in excess liability, particularly in the Northeast, where she said other insurers were making accommodations on larger accounts. She also saw renewed competition for large commercial transportation accounts and said RLI would focus on selecting accounts committed to loss control and pricing risks appropriately.
Klobnak said the surety market was crowded and that less activity outside data center construction was a headwind for RLI, which targets small to middle market contractors. She said some competitors were asking almost no questions and not requiring indemnity, while RLI was continuing its underwriting practices.
CFO Aaron Diefenthaler said the quarterly loss ratio rose to 47.4, while the expense ratio declined to 38.8. He said underwriting benefited from favorable development on prior-year loss reserves, and current-year catastrophe losses were approximately $4 million, primarily in property.
On investments, Diefenthaler said net investment income increased 13% to $46.7 million in the quarter. He said new purchases were largely investment-grade fixed income with average yields of 5.5%, nearly 100 basis points above the portfolio’s book yield.
Discussing RLI’s Steadily relationship, Klobnak said the company monitors the business through regular interaction and reporting. She said RLI has no target for how much business the partner writes and does not forecast that production.
Looking ahead to reinsurance renewals, Klobnak said RLI expected favorable terms and conditions, while negotiations remained to be completed.
Guidance
Jen Klobnak said RLI does not forecast premium production from its Steadily relationship because it does not have a target for how much business the partner writes.