A month has gone by since the last earnings report for RLI Corp. (RLI). Shares have added about 6.2% in that time frame, outperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is RLI Corp. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
RLI's Q4 Earnings Beat Estimates on Strong Net Investment Income
RLI Corp. reported fourth-quarter 2025 operating earnings of 94 cents per share, which beat the Zacks Consensus Estimate by 23.6%. The bottom line increased 80.8% from the prior-year quarter. The quarterly results reflect higher premiums, improved investment income, reduced expenses, and solid underwriting income.
Operational Performance
Operating revenues for the reported quarter were $449 million, up 3% year over year, driven by higher net premiums earned and net investment income. The top line missed the Zacks Consensus Estimate by 0.4%.
Gross premiums written decreased 2.1% year over year to $463.2 million. This uptick can be attributed to the solid performance of the Casualty segment (up 2.4%). Our estimate was $505.2 million.
Net investment income increased 9.2% year over year to $42.3 million. The Zacks Consensus Estimate was $42.9 million, while our estimate for the metric was pegged at $44.5 million. The investment portfolio’s total return was 1.5% in the quarter.
Total expenses declined 10% year over year to $341.1 million, primarily due to lower loss and settlement expenses and interest expense on debt. Our estimate was $378.7 million.
Underwriting income of $70.8 million surged more than threefold year over year. Our estimate was $32.6 million. The combined ratio improved 1,180 basis points (bps) year over year to 82.6. Our estimate was 92.
Full-Year Highlights
Operating earnings of $3.47 per share improved 19.2% from the prior-year quarter. Operating revenues were $1.8 billion, up 6.3% year over year. Net premiums earned increased 5.8% to $1.6 billion. Our estimate was $1.6 billion. Underwriting income increased 25.4% to $264.2 million. Our estimate was $226 million. The combined ratio improved 260 bps to 83.6, while our estimate was 86. The investment portfolio’s total return was 9%.
Financial Update
RLI exited the quarter with total investments and cash of $4.7 billion, up 14.2% from 2024-end. Book value was $19.35 per share as of Dec. 31, 2025, up 33% from the figure as of Dec. 31, 2024. Net cash flow from operations was $616.1 million, up 10% year over year. The statutory surplus increased 3.3% from 2024-end to $1.8 billion as of Dec. 31, 2025. Return on equity was 28.7%, expanding 700 bps from the year-ago period.
Dividend Update
The insurer paid a special dividend of $2.00 per share for the fourth quarter. Shareholder returns totaled $198.4 million. RLI has paid dividends for 198 consecutive quarters and increased regular dividends in each of the last 50 years. Over the last 10 years, the company has returned nearly $1.6 billion to shareholders. The regular dividend has grown an average of 5.4% per year.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
At this time, RLI Corp. has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise RLI Corp. has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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RLI Corp. (RLI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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