RLI Corp. Stock

Good morning, and welcome to RLI Corp. Second Quarter Earnings Teleconference. After management's prepared remarks, we will open the conference up for question 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 of Form 10-K as supplemented in Forms 10-Q, all of which should be reviewed carefully. The company has filed a Form 8-K with the Securities and Exchange Commission that contains a press release announcing second quarter results.

During the call, RLI management may refer to operating earnings and earnings per share from operations, which are non-GAAP measures of the 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 in earnings of unconsolidated investees and related taxes are excluded from operating earnings and operating EPS to present a consistent approach and excluding all unrealized changes in value from equity investment. 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 8-K contains a reconciliation between operating earnings and net earnings. The Form 8-K and press release are available at the company's website at www.rlicorp.com. I will now turn the conference over to RLI's President and Chief Executive Officer, Mr. Craig Kliethermes. Please go ahead.

Well, good morning, everyone, and thank you for joining us today. With me are Aaron Diefenthaler, our Chief Financial Officer; and Jen Klobnak, our Chief Operating Officer. Before we begin, I'd like to thank our associate owners.

Their hard work and excellence helped RLI earn recognition as A Ward's Top 50 Property & Casualty performer for the 36th consecutive year, the only company to achieve that distinction every year since its inception in 1991. We are pleased with another quarter of profitable growth.

We generated an 86 combined ratio, grew gross premiums written by 3%, increased net investment income by 17%, produced a 25% return on equity and returned significant capital to our shareholders through both a special dividend and share repurchases. Those results reflect another quarter of disciplined execution across our diversified specialty portfolio.

Markets change. Our principles don't. One other thing that hasn't changed. Insurance is still a relationship business. Our business partners choose RLI because they know our people are accessible, empowered to solve problems and consistently show up through every phase of the insurance cycle.

We help customers better understand risk, tailor coverage to their needs and deliver better claim outcomes, lowering their cost of risk. That's how trusted relationships are built and it's become one of our greatest competitive advantages. When we step back, this quarter reinforces what we have believed for more than 60 years. Strong relationships, disciplined underwriting, sensible capital management and continuous improvement remain the foundation of our long-term success.

Those principles are producing results today, and they leave us optimistic about the opportunities ahead. With that, I'll turn it over to Aaron to walk through the financial results.

Thanks, Craig, and good morning, everyone. Yesterday, we reported second quarter operating earnings of $0.83 per share versus $0.82 last year. The results reflect solid underwriting performance and a consistent increase in investment income.

As a reminder, and as referenced by the operator, beginning in the fourth quarter of 2025, we changed our definition of operating earnings to exclude equity in the earnings of unconsolidated investees and the related taxes. All prior period comparisons in the release reflect that change.

On a GAAP basis, second quarter net earnings totaled $1.82 per share compared with $1.34 in the year ago period. The difference between net earnings and operating earnings was primarily influenced by the strong performance of our equity portfolio. We recognized $103 million of unrealized gains on equity securities during the quarter compared with $44 million last year.

Realized gains were $9 million in the quarter, reflective of modest portfolio rebalancing. Underwriting income totaled $59.9 million for the quarter, and our overall combined ratio was 85.6 compared to 84.5 last year. The loss ratio improved 0.4% to 45.5, while the expense ratio increased 1.5% to 40.1 due to personnel-related costs, acquisition expense and investments in technology.

Results benefited from $39.8 million of favorable development on prior year's loss reserves compared with $27.6 million in the second quarter of 2025. The quarter also included $10 million of net incurred losses from 2026 catastrophe events.

As Craig mentioned, overall growth in gross premium was 3%, in line with the first quarter and again, led by Casualty, which was up 11%. Growth in this segment was also on trend with personal umbrella and transportation being the primary drivers. Underwriting profit for Casualty resulted in a 99.3% combined ratio, bolstered by $13 million of favorable development on prior year's reserves.

For clarity, in Casualty, the $13.7 million of favorable development disclosed in the earnings release was modestly offset by $0.5 million of reserve strengthening on prior year cat activity. Notable contributors to Casualty's overall favorable development were Excess Liability, Transportation, our Professional Services Group and Executive Products.

I'll also note that there was about $1 million of 2026 catastrophe losses in Casualty associated with our package businesses. For Property, the combined ratio was very strong at 56.8 on lighter catastrophe activity at $9 million and $23 million of favorable prior year development from both marine and cat events in years 2025 and prior.

While the competitive dynamics for E&S property persist and the segment's gross premium was down 6%, we continue to see opportunities to bind business at an adequate rate and have experienced persistent growth in Hawaii Homeowners and Marine. Surety posted a solid 87.2 combined ratio, modestly better than last year and supported by $3.4 million of favorable development.

The loss ratio improvement for Surety was partly offset by a 3-point increase in the expense ratio due to continued investments in infrastructure and higher acquisition expenses. Growth in the segment was muted, down 6% in the quarter as Commercial Surety faced some headwinds related to a slowdown in our renewable energy business.

As usual, Jen will go into more detail at the product level. Turning to investments. Our activity during the quarter was supported by $145 million of operating cash flow. While this is down compared to last year on higher levels of paid loss, it offered meaningful support to fixed income purchase activity, which was accretive with yields averaging 4.9% in the quarter.

Net investment income increased 17% to $46 million and continued to be an important contributor to our results. The investment portfolio produced a 3.4% total return for the quarter and a 3% return for the first 6 months of the year. At quarter end, total investments and cash were approximately $4.9 billion.

From a capital management perspective, in addition to our regular quarterly dividend of $0.18 per share, we paid a $2 special dividend in total, returning just over $200 million (sic) [$184] to shareholders. We also added flexibility in how we return capital with a newly authorized $250 million share repurchase program.

During the quarter, we were active in the market and repurchased approximately 235,000 shares at an average price of $51.25. At June 30, around $238 million remained available under the authorization. Putting it all together, comprehensive earnings were $166 million or $1.80 per share compared with $143 million or $1.55 per share last year.

Adjusting this result for dividend and share repurchases, book value per share increased 11% from year-end 2025. We are pleased with our second quarter and first half performance. On a year-to-date basis, our results are very consistent between quarters in terms of both top line and underwriting profitability.

We generated another quarter of combined ratios in the mid-80s, continue to benefit from higher investment income and return a meaningful amount of capital to shareholders while maintaining a strong balance sheet. And with that, I'll turn it over to Jen for more detail.

Thank you, Aaron. I'll begin with a few comments on the market environment that are relevant across many of our product lines. Market conditions continue to evolve with increased competition, creating opportunities for carriers that differentiate through underwriting expertise, financial strength and most importantly, service.

Producers are evaluating a broader range of market options as coverage offerings expand and commission structures remain competitive. We target producers and insureds who value stability and recognize RLI as a long-term, financially strong service-oriented partner.

We remain flexible on pricing where appropriate, while maintaining discipline in our coverage, providing clarity for our insureds when claims occur. Our customized underwriting approach continues to be a meaningful differentiator, allowing us to tailor solutions to individual risks rather than relying on broad underwriting mandates.

While many carriers and MGAs continue to emphasize digital capabilities, we believe insurance remains fundamentally a relationship business. We are leveraging technology to enhance our underwriting processes and improve efficiency while continuing to invest in in-person engagement with our producers.

These touchpoints help us better understand their needs, deliver responsive service and position us to win profitable business. Our reputation as a stable, dependable carrier continues to resonate with both producers and insureds, and that proven approach contributed to another quarter of excellent results.

Turning to our segment performance. Casualty premium rose 11% with rates up 10%, which matches the rate change from last quarter. Personal umbrella premium was up 26%. Rate increases totaled 17%, influenced by higher approved rate filings in California and Florida. Rate increases in the second half of the year will be tempered as some of those filings have earned through the book, and our next approved rate increase is taking effect on January 1.

Renewal retention is down 2 points from last year due to underwriting adjustments and cumulative rate increases implemented over the last several years. We achieved growth in non-coastal states, which are more favorable from a litigation environment standpoint. The combination of rates and targeted growth position this already profitable book of business for continued strong performance.

Transportation premium increased by 19% in the quarter, including an 8% rate increase. Several accounts renewed at or near expiring as strong account performance and prior rate actions supported pricing. This is an example of our focus on rate adequacy at the account level to retain profitable business while keeping an eye on loss trend at the portfolio level.

New claim counts continue to decrease for the second year in a row. This was another factor that provided confidence in our direction and allowed us to recognize a reserve release this quarter. We are seeing more new business opportunities with several competitors pulling back in certain geographies or altogether. This is partially offset by some standard markets using the auto to get to the GL or package business.

Given the loss severity trends in this market, we are emphasizing risk selection and focusing on insureds who value our in-house loss control services, which are designed to reduce our insurers cost of risk and improve overall road safety. We are getting plenty of opportunities with submissions up 9% in the quarter.

Casualty brokerage premium was down 6% in the quarter as competition has increased from other E&S carriers, MGAs and standard markets. Producers and insureds are looking for broader coverage for less rate. The industry is meeting those requests while we are picking our spots. The good news is that submissions were up 14% in the quarter, so our marketing efforts are paying off in that we are seeing more new business opportunities.

Meanwhile, our auto pricing within the excess liability coverage has reduced our competitiveness on contractors' annual practice policies. Even so, rate increases on the excess remain strong at 7%, up slightly from last quarter. While competitors are increasing limits offered on the excess, our ability to offer $10 million in capacity through all phases of the market cycle is still a differentiator, and we continue to deploy it selectively considering the severity inherent in this product line.

Our Casualty portfolio is rounded out with admitted lines products, including professional liability and package coverages for architects and miscellaneous professionals, small contractors packages and directors and officers coverage. These markets are fairly stable, and we are achieving slow, steady growth and improving underwriting profits.

We introduced a new non-admitted offering this month in the entertainment and amusement space, which is just now accepting new business submissions. These product lines contribute to our diversified product portfolio and allow us to take advantage of opportunities in various Casualty spaces as they arise through the market cycle.

Surety premium was down 6% in the quarter, primarily due to a couple of nonrecurring items, including moderating renewable energy construction activity and customs bonds that required larger limits last year.

We also made the decision to exit a few larger accounts where we no longer believe the risk-adjusted returns justified the exposure, reinforcing our discipline when the risk no longer aligns with our underwriting standards.

While the largest contractors continue to benefit from strong demand tied to data center construction, large public infrastructure and health care, activity among our targeted small and mid-market contractors has been a little more measured, although we are seeing bid activity starting to increase.

Across the industry, Surety loss ratios are beginning to move higher, and we believe that will create attractive opportunities over time as the market responds. With an 87% combined ratio and an entrepreneurial mindset, we are in a position of strength to take advantage of those opportunities when market disruption occurs.

The Property segment's premium decreased 6% while producing a 57% combined ratio. The E&S Property industry continues to experience heightened competition. We have heard that an individual submission can be sent out to over 45 markets. Some of our brokers have reported receiving unsolicited quotes based on last year's submission. New markets are coming in. Standard markets are getting back into classes that they exited during the last hard market. They are offering broader terms for less premium.

As a reminder, we saw our first rate decreases on hurricane-exposed risks in the third quarter of 2024 and for earthquake risks in the first quarter of 2025, which means accounts are just now receiving rate decreases on their second renewal during the soft market.

The rates we are achieving are approaching our benchmark price, which equates to our targeted risk-adjusted return on the business. Our underwriters are proactively protecting our renewals and pursuing new business opportunities by offering more quotes, which oftentimes include multiple coverage options.

We are increasing limits by moving from the primary policy to full limit coverage or providing larger shares of layers within an insurance tower. We are holding the line on terms and conditions that will matter when we handle the claims after a loss. This is evidenced in our renewal retention ratio, which is down to just under 70%.

We see more responsible behavior from competitors who are putting their own capital at risk. We will maintain discipline, own the underwriting results and fulfill our commitment to insureds when losses occur. Our producers remember how we helped them solve problems during the recent hard market. Our stable, responsive market presence with underwriters who have the authority to make decisions is a differentiator.

Hawaii homeowners premium grew by 9%, including a 12% rate increase. New business opportunities have slowed due to competitors expanding their appetite and the conclusion of a book rollover.

However, our local team continues to win new business based on outstanding service and our reliable long-tenured presence in Hawaii. Profitability rebounded with a quiet loss quarter following a busy first quarter with the Kona Low wind events.

We are pleased with Marine's results this quarter. The team grew premium by 7%, including a 1% rate increase in a market that is becoming increasingly more competitive. In a throwback to our founder, Jerry Stephens, this team demonstrates hustle. The broad definition of Marine risk requires creative problem solvers to evaluate the variety of exposures presented. Our team produced a healthy underwriting profit based on consistent discipline in inland Marine and improved results in a difficult cargo market.

We renewed a couple of reinsurance agreements during the quarter, including Marine, Executive products, Professional liability and our Earthquake surplus share treaty. Reinsurance market conditions were favorable with stable coverage and rates flat to down on all treaties. We ended the first half of the year with an 86% combined ratio while growing 3% in an evolving market.

We benefit from 61 years of underwriting experience in a variety of market conditions. Our experienced underwriters, claim professionals and support teams are in constant communication to provide feedback and adjust our approach to take advantage of profitable growth opportunities.

These are available within pockets of each of our segments. As employee owners, our decisions on where to deploy our capital are aligned. We are approaching the back half of the year with strength and confidence in our approach. Now I'll turn the call back over to the moderator to open it up for questions.

[Operator Instructions]

Your first question comes from Michael Phillips with Oppenheimer.

I want to talk on the Casualty growth, if I could for a second. And you mentioned umbrella and transportation books as some of the drivers this quarter -- last quarter as well, I think. And I know you've been taking a lot of rate in both of those 2 segments. I guess I want to get a sense of how much of the growth recently this quarter to last quarter is rate driven, but you've also mentioned a lot of new business opportunities.

It makes me think that you're pretty optimistic about those 2 pieces in terms of growth going forward without much of an impact possibly on your margins. When I look at the Casualty loss ratio, this half, it's like 67% or so and change accident-year loss ratio. That's higher than prior quarters, prior years. So I'm wondering about the growth opportunities in umbrella, Casualty and transportation given the new business and the rate you're seeing?

Yes. Great question, Michael. Thank you. I think we are seeing a lot of growth opportunities in those spaces, as you mentioned, and I appreciate you commenting on rate. If you look at auto rate overall was 10% for the second quarter. If you look at all of our various types of commercial auto coverages.

That's down a bit from the first quarter. But again, some of our accounts in transportation, which can be large, renewed closer to expiring because they had great loss experience. They bought into our loss control services and are improving their results. And so that translates into them saving money on the renewal, which is what we're looking for.

Outside of that, however, I would say the transportation marketplace is disrupted. There are markets that we compete against where they are reducing their appetite either in a particular geography or altogether, and that has resulted in us having more new business. For one thing, we are going out and seeing more producers.

So we're really leaning into marketing activities but also some competitors are limiting the amount of limit that they're actually putting out, which like a public company, a public bus company needs to purchase $5 million of limit. And if one of our competitors is only putting out $2 million of limit, that creates more work for the producer and the insured. And so our $5 million solution is very helpful in that scenario.

So we are seeing more submissions in transportation, and we are taking advantage of that by offering more quotes and very excited that some of those are binding at the pricing that we think is adequate to cover the loss experience for that account. And we do have the benefit of loss experience in the transportation area. So we loss rate those accounts and check the data around that to make sure that we're comfortable with it.

So we think that, that's well-priced business that we're putting on the books. When it comes to our first umbrella, we are seeing a good amount of rate. So we had 17% rate in the quarter. That matches the rate increase for the year. We are looking at rate adequacy by state on a regular basis every quarter.

We've got more approved rate filings that are going to be effective early next year, which is great. But in addition to that, we work with our producers closely to monitor and direct the type of business that comes on to the books.

So we've emphasized getting away from some of the coastal states where litigation is a little more challenging or the severity is a little larger and moving more towards non-coastal states, and we're seeing the book -- the mix of the book change in that regard.

We also monitor various risk characteristics, and we're seeing those data points also improving. But that takes just regular contact and communication with our producers. So many of them, we have set up either a monthly or a quarterly call where we talk about their book in particular, what we're seeing and what we'd like to see going forward. It's a very fruitful conversation.

On the other umbrella, our commercial umbrella book, we are seeing it slow a bit. We took some action, I guess, last year probably in reducing our appetite on the auto portion of that and by increasing our rates in that and also asking more questions around the auto exposure.

Obviously, we would like someone with a lot of auto exposure to purchase an auto liability policy and not have it just flow into their umbrella. So we try to encourage that behavior. We see standard markets and others being a little more aggressive so that they can get the profitable GL coverage on their paper. So that has been a bit of a headwind, but we feel that it's important in this litigation environment to be careful around those auto coverages.

But outside of that, our team has done a great job of individually underwriting accounts. And what I mean by that is if you look at an account and what the issue is, maybe there's a location with a particular issue. And so we can address the issue for that location, but not have a blanket exclusion, for example, across the board.

And so it meets the insured's needs, it meets the producers' needs and it meets our needs. And that's what we're trying to do is just dig a little deeper into the submissions we received to make sure that we're providing the coverage needed, but not extra coverage and it kind of meets everybody's needs. So that kind of gives you a rundown of those 3 marketplaces.

Great. That's always super helpful. If I could turn to the expense ratio for a second. Aaron mentioned in his comments, some of the pressures from acquisition and investments. I guess given all that, the last couple of quarters have been little higher than expected. I guess trying to think about how to think about the expense ratio in the individual pieces over kind of the near term.

Yes. I'll characterize the increase over last year, the 1.5% that I referenced increase or 1.5 points of the expense ratio increase as 2/3 people related, maybe 1/3 or half of that 2/3 is coming from incentive compensation structures.

We've had strong performance in the first half of the year, strong equity market returns, which is supporting our book value growth. And then the other 1/3 is really acquisition cost, as I referenced, some of that being investments, some of that being mix of business and where the ultimate commission comes in on an overall basis. So that's how I would break it down.

Okay. I guess just last one, if I could, a short one on your buyback program, a pretty good sized buyback this quarter, $12 million at a pretty good price. It seems like maybe you got in, in May when the price was good and maybe stop and mature. But could you just maybe just use the opportunity to remind us if there is a philosophy on your buyback? Is it kind of selective repurchases? Or maybe could we think about a time period when you expect to kind of be through the $250 million?

Yes. Well, first, I'll say there's no formulaic answer around any of this. And by the time that program was authorized by our Board, and we got the infrastructure in place in order to actually have some activity transpire, we were into kind of the 1st of June.

And so we really had about 2 weeks time frame before the quiet period started at the end of the quarter that we could transact in the market. So it's a pretty short time frame. And I'll say the primary aspect here is that we consider our share repurchase program is really a complementary form of return of capital and not necessarily mutually exclusive with special dividends.

You saw the announcement of the special dividend and the authorization announced and we actually purchased some of our shares in the quarter. So there is a selective element of share repurchases on a forward basis. And I do not have a time frame for you to exhaust the -- what remains of that $250 million authorization.

Your next question comes from the line of Hristian Getsov with Wells Fargo. Please go ahead.

My first question is on excess Casualty . A large national carrier that reported earlier in the month talked about excess Casualty trends in the double digits. I guess how do you feel confident about writing excess Casualty given you said pricing was up about 7% and holding margins?

Yes. I would say our excess Casualty book specific to us is mostly construction business. I'm not sure what all classes would be included in other people's books of business. So when you look at our books specifically, we believe that we are pushing rate where we can.

I would say construction business is overall a profitable business unit. You see that within our book in terms of reserve releases that we continue to be able to recognize and just the profitability that we see. And so there is some competitive pressure there.

So we have to balance getting rate with keeping our profitable book of business. And we do that by individually underwriting, as I mentioned those accounts, trying to hold on to our renewals because we know them very well and trying to make a best effort on new business to take advantage of that.

If you look at our rate versus our trend, we're close. We're just keeping up with trend. There's probably not a lot of excess that we're getting, but we're comfortable with that given our starting position. So a lot of people talk about rate change. I like to think about rate adequacy. And when I look at the rate adequacy of that book, we're comfortable where we're at.

I'll just add to that. This is Craig. I mean, just to be clear, our excess Casualty typically is first layer excess Casualty , about half of that is attaching above our own primary, which we are handling the claims.

We're controlling the claims. So that's how we get more confident than someone that's participating really high excess. They don't hear about the claims for quite some time. We usually hear about them fairly quickly.

Got it. And then just pivoting over to property. I guess how are you guys thinking about -- and this is particularly focused on away from Hawaii and Marine. But how are you thinking about growth in underlying margins in this segment as it seems pricing is continuing to decelerate and likely will continue to.

And we've heard about from some peers about potentially dropping picks for the sake of growth. And I'm just trying to get a sense of like how rate adequate is that book with these rate decreases and maybe how you're kind of thinking about it as you kind of look over the next 12 months?

Yes. Good question. So if you look at rate, we have given back a little rate. As I mentioned, we're on the second renewal for an account. So while people are tired of the soft market, I'm tired of the soft market. It actually hasn't been going on that long.

So we are just in the second renewal of an account. We gave back some rate last year. We're giving back rate again. We think our rates right now that we are quoting are in about the 2022 time frame. So we've reversed a couple of years, but they're still well above some historical points of time. We look at it by considering what all the costs are.

So we have a benchmark pricing tool that's at the underwriter's desk where they can understand what that account is adding to our portfolio. So we look at expected losses, all the different costs that go into it, whether that's reinsurance or underwriting costs and technology costs and all that in addition to a profit load.

And we are actually still achieving our benchmark pricing rate, which means we're getting the targeted return that we're expecting that we want. Rates are just one factor. So we are paying more attention to the words. So the policy form, I should say. That's what matters.

We're going to be handling our own claims when they happen. And so we need to know what that coverage is. We see some competitors throwing in various coverages, maybe even with a rate decrease in addition to that. And that's where we start to draw the line.

So our renewal retention ratio has been down and now it's just under 70%. I've heard in the market, some people are saying that they're drawing the line, but their renewal retention seems to be in the 90s. So I question how much they are actually pulling back.

So we don't have the top line target, which gives us the freedom to make sure that we're being responsible for when those claims happen. So we feel our portfolio is very well priced. We're very comfortable with where we're at. We have room to grow from an exposure standpoint, but we're only going to do that should the market improve.

Your next question comes from the line of Mark Hughes with Truist Securities. Please go ahead.

Aaron, the uplift sequentially in investment income was pretty strong. Anything unusual or nonrecurring there? Or is this a good baseline on a go-forward basis?

I think the foundations are in place for continuing to grow investment income should the rate environment hold. And you know today, we're seeing 10-year rates up again. I think that's a solid backdrop for us overall as we put that next marginal dollar to work.

I referenced the purchase yield side of the equation, that's probably 60 basis points above our current book yield. So to the extent that rates hold and the portfolio continues to grow, which has grown nicely, that should be a solid backdrop for us.

I appreciate that. Jen, on inland marine, that has been seemingly a good business for you and I think a good business for the industry as a whole. How do you think that cycle is going to play out?

Is there a risk that it could get caught up in some of this wider property downdraft? Or do you think that will be a more kind of a moderate cycle perhaps?

Well, Mark, I would say that the inland marine market is already getting more competitive. And we're seeing that in the rate change where we used to get probably in the upper single digits. Now we were excited about getting 1% rate increase, again, looking at rate adequacy, considering we want to hold on to our renewals.

And so we're being very individualized in how we're thinking about each account so that we can hang on to what we need to, but be conscious of rate. We are seeing more competition in that space. It's a healthy space for the industry as well.

So our key is to have the right people who are reaching out to our producers on a regular basis for those interesting marine accounts. Marine has a broad definition that can be a lot of things. Anything that moves essentially can be marine.

Some of that tends to flow back and forth between the property market and the marine market to see where they can get better rates. We pay attention to that. Our marine people even talk to our property people to pay attention to where people are trying to push.

So during this part of the cycle, it's not as much of an issue. When there's a hard property market, you see things come back to the marine market. But right now, that is not the issue. So for us, it's about just keeping our eye on the ball of knowing that this is a great space. So let's see how we can grow and it's just having the right people in place to do that.

I will just add that inland Marine is a huge space. So there's a lot of -- over hundreds of niches within there. We're focused on 5 or 6 of those. So we're focused on being narrow and deep.

Your next question comes from the line of Andrew Andersen with Jefferies. Please go ahead.

You had mentioned Surety loss ratios are beginning to rise across the industry. Could you maybe just talk about where you're seeing signs of that deterioration?

And how quickly you think the market typically responds here as I don't think there's been a Surety cycle in quite some time.

Well, you're right about that, Andrew. We've been patient to try to see a Surety cycle, and it hasn't been coming around for quite a while. We have some insight into where those industry losses are coming from. But again, we have not seen them ourselves.

So some Surety results indicate that there are losses mainly on the construction side of the house, whether that's through regular large construction projects or some of the renewable energy projects have seen some issues. I know there are a couple of commercial Surety losses in the industry as well that are fairly large.

Again, we see it kind of from the distance -- so we hope that the cycle will occur so we can take advantage of it. And for us, we want to keep our book clean so that we're not cleaning something up as opposed to taking advantage of that opportunity when it arises.

And Aaron, if I put together some of your comments within Casualty and the underlying loss ratio, it seems to be up 70 bps on a year-to-date basis compared to first half '25. And it looks like it did increase a little bit quarter-over-quarter in 2Q. Can you maybe just talk about some of the drivers there that has led to that change?

Yes. So just a very slight increase when you look sequentially quarter-to-quarter, but the driver really comes down to the mix of business. If you think about where we've been growing in the first half of the year and some caution around those businesses in terms of the longer-term trend that certainly has gotten us to the point where we're driving rate in those businesses.

We want to make sure that our process is sound, and we're reserving appropriately to reflect uncertainty in the business. So it really comes down to mix as the driver of that underlying.

So I'll just add that a lot of our growth, as we've talked about, is coming from Personal Umbrella and Transportation. Obviously, that's auto wheels-based businesses.

Those are places that we're going to continue -- well, first of all, there are places we've been in for 30, 40 years and have outperformed the industry significantly over that time. But we're always going to be cautious when we're growing in the products where we've seen at least historical severity, as Aaron said, and where we -- legal system abuse is more prevalent.

But again, given our -- we have a lot of confidence in our people, we wouldn't be leaning in unless we believe in our team and we believe in our business. And -- but we're also going to be cautious when we do that. And that's just part of our history and part of how we do things.

Your next question comes from the line of Gregory Peters with Raymond James. Please go ahead.

So throughout your prepared remarks, you referenced service as being a differentiating feature of your value proposition. And I think in many instances, you talked about using that as a lever to offset competitive pricing pressures that you're seeing in the marketplace.

And so I was hoping maybe you could get a little deeper into that topic. Just curious how the service argument helps to offset when, say, for example, a hypothetical competitors coming in with the renewal rate that's a lot lower than where you are and how you win that argument.

Sure. So it varies by business unit, but I'll give you a couple of examples. So the most obvious one is in transportation where we literally provide services to our insurers through our loss control.

So we have an in-house loss control group that works with the insured or actually works with the company prior to them being an insured even to understand what their loss control practices are. So how are they hiring drivers? How are they training those drivers?

How are they maintaining their equipment? How are they monitoring over time? Most of these companies today have all of the automation in there. They have the cameras, they have the telematics. Are they using the data to improve driving practices over time? Or are they not using that data?

So we understand the practices, and we try to help them to improve by actually providing some training courses, but also just making sure that they're paying attention to all of the data that is available. So those are literal services that other companies don't provide in the same manner.

Some companies outsource that or just take a different approach. Other than that, I can tell you, in other places, it's amazing what you can win when you answer the phone. I know that sounds ridiculous, but there are a lot of companies who literally will not pick up the phone, you can't talk to a person.

So while everyone is really focused on automation, and we're doing a lot regarding automation of many activities at RLI, we want a person to be available because we hire experienced people who know the space.

They know what people need from a coverage standpoint. They want to be responsive. And so we want to make those people available to our producers and our insureds to help them. In other cases, we have, for example, in First Umbrella (sic) [personal umbrella] where we have either a monthly or quarterly call with some of our producers and we ask them, how are we doing?

How is our system? It's a very automated situation, but where are your customer service reps running into trouble? Are there too many clicks? It's something not obvious in a question. And so by gathering that input on a regular basis and actually responding to it, we're improving the process for them to where we're even easier to do business with gives you an example, but it's really a theme throughout all of our business units.

Each one is challenged to be winning on service because if you're just buying the business, that's going to turn out poorly. So we'd like to win the business based on really providing value to our customers.

I guess I would just add that our underwriters are empowered. They have the authority to make decisions. They're running their businesses. They're not running up -- every little thing up the flag poles to -- they have to wait a month to see what home office says.

They can get back to the broker. Sometimes that broker, by the way, that answer is no, we won't do that business. But a quick no is a lot of times better than a 1-month long yes or yes, if. So -- and at the end of the day, they like our people. I mean they think our people are authentic. They're real people. People like doing business with people they like.

Okay. Makes sense. Certainly, when you speak about automated phone answering that resonates on a personal level with many of us. Can I pivot -- I know you spoke about this in your comments and answered some of it with previous questions.

But I just want to go back to the umbrella line and you called out California and Florida and then where rates are underway. And then you said there's another rate approval on January 1.

So let me just -- I'm just trying to -- is that a nationwide rate increase? Or is it -- are your rate increases umbrella happening state by state? Or just giving some granular information on what you meant by those comments.

Sure. So typically, we file a rate in a state when it's needed. And so that can vary. It's not always a countrywide filing. In the case of this next filing, it actually is a countrywide filing because we're changing kind of the infrastructure around it.

And so it's taking a bit more technology work, et cetera, to implement. And so that's why this one is aligned. But previously, it has not been aligned in the past. A lot of times, the biggest states that we have especially those that take a long time to get a rate approval, they're definitely not going to line up with other states.

So this is a little unusual that it happens to be lining up this time. But again, it's just because it requires a little bit more work to get it implemented versus doing a one-off state.

[Operator Instructions] Your next question comes from the line of Meyer Shields with Keefe, Bruyette, & Woods.

A couple of questions just on comments. If the rate of Casualty rate increases is decelerating in the back half, does that mean that we should anticipate with the normal written earned lag a little bit more increase in the underlying loss ratio for Casualty ?

Meyer, it's Craig. I guess what I would say is, first of all, we got a lot of mixed things going on there. But two, obviously, we're going to update -- the actuaries are going to update their estimates of prior year's loss ratios, which is really the starting point by which we're going to be looking at things.

But certainly, there is -- part of that is math. And if we're not getting the same level of rate, everything else being the same. And if we assume loss trend stays the same, it could potentially raise that.

I mean, I couldn't really tell you though we haven't gone through that process for the -- we do it twice a year. We do it going into the year and then midyear. So we're about ready to start that process again, and we'll get all that information from the actuaries with their estimates going forward.

Okay. Understood. When we look at the property book now compared to, let's say, 2 years ago, is there a difference? Obviously, rates are lower. I think everyone gets that.

But I'm trying to get a sense as to how much of your premium is basically there to cover attritional losses versus catastrophe and weather losses and how that's changed over the 2 years?

Well, let's see. I would say if you think about our mix today, we definitely -- as we were growing, we were putting on more rate and exposure in the cat space than we were in the non-cat space.

So if you think about historically, our book of business, we used to back 15 years ago, we used to have more of a concentration in the Midwest where you're not looking at hurricane and earthquake, you're looking more at hail, tornado, that kind of thing.

And we wrote more habitational business. And we learned from that, that there's a ton of losses and it's underpriced, deductibles are an issue. There's a lot of coverage issues, a lot of old roofs that actually should be replaced for maintenance.

And since they're not, all of a sudden, we're replacing them. So from that experience, we have long memory, and we still have shifted and maintained more of a concentration in the cat-exposed states, I'll say, and cat, meaning the hurricane and earthquake exposed states more so than the middle of the country.

So when you see events occur like the spring storms, depending on where they occur, that's going to really impact what our potential losses. If there are tornadoes in Florida, which does happen, you're going to see more of a loss than if there are tornadoes in Illinois as an example.

So I would say, as you look at the premium now decreasing, obviously, we're experiencing more of a decrease in the cat exposed areas as well. And so probably more stable in the non-cat. That's my overall comment. I don't necessarily have that in front of me.

I mean to help you with that a little bit, Meyer, I mean, obviously, the attritional loss ratio, fire-driven stuff, I'll call it, non-hurricane, non-earthquake is -- that has a higher loss ratio on an expected basis. So we have a lot more -- of a faster feedback loop.

We hear about those claims a lot faster. They also are -- they happen every month, right? We get some fire losses every month. So that loss ratio does tend to be higher. It's also less volatile. so the cat portion has a lower expected loss ratio, although it's been increasing, obviously, with rates going down.

So it's really, again, back to mix. It really depends on what that mix looks like going forward.

Okay. That's perfect. That's what I wanted to know.

Your next call comes from the line of Mark Hughes with Truist Securities. Please go ahead.

The ceded premiums in property, just looking at the ratios last couple of quarters down 4 or 5 points year-over-year. Is that shift going to be persistent? I think your ceded premiums have been down -- ceded premiums are 27%, 28% the last couple of years. Is the mix changing such that, that's going to be -- you're going to be ceding less premium?

Well, Mark, as you recall, on the property book, our largest reinsurance renewal is 1/1 of the year. So for the calendar year, that's reflective of the current reinsurance structure in which pricing was down and also we bought less of a cat tower.

And so that 5-point differential when you look at it compared to last year should continue for the balance of this year. Everything will reach that 1/1 again, and we'll see where we're at then. But you are correct, at least for the next 6 months.

Yes, very good. And then on the general corporate expenses, you talked about personnel expenses being up, maybe some extra compensation expense in there. On an underlying basis, is that -- what should the expense growth be in corporate?

Well, if you look back over time, that general corporate expense line has been fairly consistent unless we get a driver of incentive compensation that would drive something in a particular quarter, which is the case this quarter. But general corporate is fairly steady otherwise.

Yes. Okay. Very good.

Your next question comes from the line of Hristian Getsov with Wells Fargo.

Just one follow-up for me. Any additional color on how to think about the premium growth for umbrella in the second half versus the 26% growth we saw in the Q2, just given your comment that the rate increases are going to moderate in the second half?

Well, it's hard to predict. Our personal umbrella product has about over 500,000 insureds. So the average premium isn't very big. So it takes a number of policies to move the needle, which shows you we are -- we have more policies on the books than we used to.

So it's hard to say with the rate increases happening and the shift towards the inside of the country, it could slow a bit, especially given the pause in some of the rate increase. But over the long term, we still think that, that market has great opportunity.

We've seen reports from other carriers where their books are not performing well at all. There's definitely a need for that coverage in the country and also generally for people who buy it, but they see that their personal rate increase is 100%, which we've experienced that in the room here.

And so there's definitely a need for it, and it's just a matter of managing that growth for us. We want to be comfortable with the growth. So we're trying to get the right growth on the books that we think will long term be profitable while taking advantage of that without having our results deteriorate. So it's a balancing act.

Yes. I would just add that, I mean, the rate in and of itself should -- I mean, will probably slowdown, which would -- some of that does drive the growth. But this space has got a lot of disruption.

And as we've said before, disruption is oxygen for our business. So I think there's going to be lots of opportunity. The question is going to be is how comfortable we're going to be with that and where is that -- where are the opportunities.

If the opportunities are in, let's say, California or Florida, we probably aren't going to lean in quite as heavily as if they would be in Montana or South Dakota.

Yes. It's not hard to put premium on the books, but it's hard to put profitable premium on the books, and that's what we're trying to do.

Your next question comes from the line of Meyer Shields with Keefe, Bruyette, & Woods.

Just a quick follow-up. Jen, when you have brokers sending out submissions to like 40 markets, does broker commission rate become a bigger part of the competition?

Well, as you know, Meyer, people always want more commission. So we are asked all the time about commission. That is a factor. It just depends.

There are a lot of factors in what can get bound. And if you're not responsive to your producer, they can't necessarily wait for those couple more points of commission. They have to get it done. They've got full desks that they're working on many accounts.

We try to balance -- we do give sometimes on standard commission, but it's just -- it's on an account basis. And we try to manage that along with all the other factors that we consider.

So yes, in the soft market, as the market softens, brokers are asking for more commission. I would point out that their margin tends to be bigger than ours. So it's hard for us to share more, but we try to be selective in how we do that.

There are no further questions at this time. I will now turn the conference over to Mr. Craig Kliethermes for closing remarks.

Before we conclude, I'd like to leave you with one thought about what drives our company. Our culture comes down to 2 basic tenets. We are owners and we care deeply. Ownership means underwriting for profit, continuously improving and focusing on long-term value instead of short-term premium growth.

If we can create attractive returns, we'll invest. If we can't, we'll return capital to our shareholders. That's how we've remained financially strong and present through hard and soft markets. And we care deeply. We help customers better manage risk. We stand behind our business partners and our products.

We take pride in our company, and we challenge one another to improve every day. It's simple. Simple does not mean easy. Those tenets have guided RLI for more than 60 years, and they will continue to guide us through what comes next. They are the reason we are confident about the future.

Thank you for your time, your thoughtful questions and your continued confidence in RLI. We look forward to speaking with you again next quarter.

Ladies and gentlemen, if you wish to access the replay for this call, you may do so on the RLI homepage at www.rlicorp.com. This concludes our conference for today. Thank you all for participating, and have a nice day. All parties may now disconnect.

Good morning, and welcome to the RLI Corp. First 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 10-K as supplemented in Forms 10-Q, all of which should be reviewed carefully. The company has filed a Form 8-K 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 are excluded 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 8-K contains a reconciliation between operating earnings and net earnings. The Form 8-K and press release are available at the company's website at www.rlicorp.com.

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

Good afternoon, everyone. We appreciate you being with us today. With me are Aaron Diefenthaler, our Chief Financial Officer; and Jen Klobnak, our Chief Operating Officer.

I'll begin by saying we feel good about how we started 2026 and the position we're in as we move through the year. For the quarter, we generated an 86 combined ratio. Premiums grew 3%, led by casualty and net investment income increased 15%, continuing to be a meaningful contributor to overall results. Compared to a very strong first quarter last year, results were still excellent, but a bit more tempered, driven primarily by catastrophe activity, disciplined growth and normal variability that comes with taking on insurance risk. Stepping back, the underlying business is performing well and consistent with our expectations.

The insurance marketplace continues to be dynamic. We're seeing more competition in some areas from broker-owned facilities and MGAs that operate with incentives that are not always aligned with long-term underwriting profitability. In the most competitive spaces, we are picking our spots, finding rate adequacy on accounts where it's still available, focusing on producer relationships and adding value to customers that want our expertise and service.

We are seeing rate acceleration and market disruption in wheels-based products. There is opportunity here when done with discipline and vigilance. Our underwriting and claims expertise positions us to select the right accounts, achieve the rate we need and drive better claim outcomes over time.

Adding to the general market disruption is the emergence and rapid adoption of artificial intelligence, along with the regulatory uncertainty that comes with it. We're encouraged by what we're seeing with AI, not as a headline, but as a tool. It's helping us put better data in the hands of decision-makers, making us more responsive, more efficient, easier to do business with while keeping human intelligence and judgment at the core of everything we do.

Market dislocation creates opportunities for those with the confidence and financial strength to act. We have both. Our efforts will continue to be grounded in the same timeless core values that have guided RLI for over 60 years, community, customer focus and continuous improvement. We like the position we are in. We're seeing opportunities in the right places, and we believe we're well positioned to continue delivering consistent profitable results over time.

With that, I'll turn it over to Aaron to walk through the financials in more detail.

Thanks, Craig, and good afternoon, everyone. Last evening, our first quarter release reflected an increase in gross premiums of 3% with strong contributions from our Casualty segment. Operating earnings were $0.83 per share compared to $0.89 last year and supported by solid underwriting performance and a 15% increase in investment income.

As a reminder, in the fourth quarter of 2025, we began to exclude earnings of unconsolidated investees from our definition of operating earnings. All comparables in our release reflect that change. Underwriting income was $58 million in the quarter, benefiting from $35.5 million of favorable prior year reserve development, offset by $16 million of catastrophes and a higher underlying combined ratio.

On a GAAP basis, first quarter net earnings totaled $0.60 per share compared to $0.68 in the year ago period. As was true in the first quarter of 2025, the largest driver of the differential from operating earnings was the negative return in our equity portfolio and the associated $39 million of unrealized losses.

At the segment level, casualty growth totaled 10% for the quarter with significant contributions from personal umbrella and commercial transportation, both of which continue to benefit from rate increases. In terms of the underwriting results, casualty posted a 97 combined ratio, outperforming 2025 by 2 points and inclusive of higher levels of favorable prior year development at $14.5 million. Casualty's reserve development was broad-based with executive products, general liability, professional services and transportation contributing to the release.

It should be noted that of the $16 million of catastrophe losses disclosed in the quarter, $2 million was attributed to packaged businesses in casualty. Property experienced a 9% decline in gross premium, largely due to rate decreases in E&S property, while Marine and Hawaii homeowners again afforded offsets. Contributing to the bottom line and property 62 combined ratio was $20.6 million of favorable prior year's reserve development on these shorter-tailed lines, offering a 16-point benefit to the segment loss ratio.

Catastrophe events, including the recent storms in Hawaii totaled $14 million for property, up a bit from events in Q1 2025. Surety's top line gross premium was down about 1% from last year, and the segment reported a 94 combined ratio, largely attributable to limited favorable prior year development compared to a strong release last year. As a reminder, surety loss activity can be variable and can have a significant influence over shorter periods.

Operating cash flow for Q1 totaled $43 million, down $60 million from last year and was influenced by some tax credit purchase activity, bonuses paid and higher paid losses. The tax credit purchase is notable as it had a significant impact on the 18.5% effective tax rate in the quarter. Despite more modest cash flow, we still had reinvestment opportunities with fixed income purchase yields averaging 4.8% in the portfolio, approximately 60 basis points above our book yield.

Recent capital market volatility has moderated, and we have primarily focused on putting money to work in investment-grade fixed income. Total return for the portfolio in the quarter totaled a negative 0.4% with income partially offsetting price declines for both stocks and bonds.

Turning to the liability side of the balance sheet. We found an opportunity in late February to access the capital markets and raised $300 million of long-term debt. With our history of consistent financial results, we believe RLI has a terrific credit story. This issuance carries a coupon of 5.375% and a 10-year maturity and returns our leverage profile to our historic average. Alongside the long-term debt, we repaid and upsized our revolving credit facility with PNC Bank. That backstop liquidity at RLI Corp. is now $150 million in size and replaced the prior transaction.

Looking at overall results when we isolate on comprehensive earnings of $0.32 per share and adjust for dividends, book value per share increased 2% from year-end 2025. Finally, I'll mention the recent rating action from AM Best, which upgraded the RLI Group of companies to A++. This puts RLI in a distinguished category of high-quality P&C companies that have similar financial strength. We view the reaction from AM Best as a recognition of our long track record of underwriting results. All in, we are very pleased with the start to the year.

And with that, I'll turn the call over to Jen for more details.

Thank you, Aaron. We are pleased to report another quarter of underwriting profit, and we're able to achieve some growth even as market conditions have become more challenging for many of our businesses. Casualty segment premium increased by 10% and rates were also up 10% for the quarter. Personal umbrella led the way with 23% premium growth. Rate increase for the quarter was 16%, and we expect increases to continue as recent rate approvals earn into the book.

Our investments in data and analytics are paying off in that we can make local targeted improvements to the book over time. Our new business growth has shifted from more hazardous states like California, Florida and New York to less litigious states like those in the Midwest as we have increased rates, selectively reduced commissions and worked with our producers to proactively manage growth over the last few years. We expect growth to persist as the new business pipeline remains strong and as we continue to ensure adequate rates are earned throughout the book.

Transportation premium grew by 27% with auto liability rate increases on renewals up 15%. In addition to rate, the growth was driven by several new business opportunities with insurers who invest in superior risk management and where we could achieve adequate terms. Submissions were up 15% as competitors in some classes within the book are pulling back. New claim counts were down 14% compared to the first quarter of 2025. We believe our investments in loss control and claim service are appreciated by our customers and will have a positive impact on their bottom line and ours.

E&S casualty premium was down 4% with a slow start to buy new business this year due to concerns with the economy, supply chain, interest rates and inflation impacting investment decisions in the construction industry. Despite this, new business submissions are up 14% as continuous in-person marketing is keeping us on our producers' radar. Quotes are up as well, reflecting a solid pipeline of construction projects. As expected, there can be significant delays between the time we release a quote and when that business is bound. We believe construction activity will rebound as economic conditions stabilize, and we are well positioned to respond.

Recognizing ongoing severity in the commercial auto liability coverage, our appetite is more limited for auto on excess liability business. This appears to be a more conservative stance than our competition, but we believe it is a disciplined approach to underwriting in this environment. The theme with our package businesses is that the growth is being driven primarily by rate. Both premium and rates are up 5% to 6% with higher increases related to the auto exposure. This business focuses on architects, engineers and contractors and rounds out our diversified construction industry portfolio.

In surety, premium was down 1% in a very competitive market. Single-digit growth in contract and transactional was offset by a small decline in commercial surety. Within contract surety, growth is occurring at the top end of the market, driven by large infrastructure projects, including data centers. Our focus, however, is on small to midsized contractors who work on smaller projects or subcontractors working on those large projects. While bid activity is increasing in our space, we are not yet seeing that translate into meaningful growth.

Our bottom line was impacted by one large contract surety loss arising from our prior period claim. This was an isolated incident and is not indicative of a change in risk or approach for the broader book. In commercial surety, our renewable energy portfolio portion is maturing with fewer new business opportunities due to slowing investments in that industry. Across our surety division, we are well positioned with local expertise, continued producer engagement and new transactional surety system functionality that provides full life cycle capabilities to our producers. Our opportunity pipeline is healthy, and we are focused on execution.

The property segment's premium was down 9% as the business mix shifted from catastrophe to non-catastrophe premium. While the top line reflects the continued competitive environment, our underwriters are still finding profitable opportunities. We had an excellent start to the year, producing a 62 combined ratio despite increased catastrophe activity in parts of our book.

E&S property premiums declined 16% in the quarter as market capacity remains plentiful. Consistent with market commentary, rate change on renewal business was down 19% for hurricanes and 16% for earthquake. While new business submissions are up, winning business has become more challenging. We're seeing increased competition from the admitted space where programs have been created for certain classes like hotels and restaurants. These programs were available before the last hard market with similar terms and conditions. We will remain disciplined and patient and wait for those opportunities to come back to the E&S market over time.

While we are giving back some rate, the accounts we bind are priced above our technical benchmark pricing, meaning we believe we are achieving adequate returns on the business. We also saw some benefit from reduced reinsurance costs and experienced manageable spring storm losses, resulting in a material contribution to the bottom line from this division.

Marine had their largest premium quarter since inception with almost $47 million of premiums, an increase of 4% from the first quarter of 2025. Submissions and quotes continue to increase, particularly for our Inland Marine business. Loss activity came in as expected, and we again benefited from favorable reserve releases, which allowed Marine to contribute meaningfully to our bottom line.

Hawaii homeowners premium at rates each grew 12% in the quarter. Our service-oriented teams continue to identify growth opportunities on the islands. We responded to several Kona storm events, which were a combination of high winds and excessive rain by deploying our local claim examiners to visit impacted insureds and address their needs. While these events affected our bottom line results in the quarter, past experience shows that this timely in-person response drives stronger relationships and results in increased opportunities over the long term.

Overall, our insurance portfolio is very healthy. We achieved modest growth, driven primarily by rates, and we realized another quarter of underwriting profit. We continue to make investments that we believe will drive long-term profitable growth.

On that note, we are always looking for talented underwriters and claim professionals who are A players and are interested in contributing to a true underwriting company where they can be creative, make long-term bottom line decisions and collaboratively improve our products for our insurers and our relationships with our producer partners. They own their results with their compensation and shared rewards based on their decisions and they will become an associate RLI owner who benefits from our diversified product portfolio that has produced solid, stable results over time.

Adding to our team is one way that should help us continue to achieve profitable growth over the long term. We are encouraged by our positive start to 2026 and remain optimistic about the year ahead, knowing that our team is capable of navigating this evolving market.

And now I'll turn the call over to the moderator for questions.

[Operator Instructions] Our first question comes from Michael Phillips from Oppenheimer & Co.

I'm curious how you would classify in your GL book, the just overall competitive environment this quarter versus recent previous quarters.

Yes, this is Jen. I would say for GL, we have personnel around the country that are working with our wholesalers, our wholesale partners and it does vary by region a bit. So we've noticed, I would say, the construction industry is a bit paused in the Northeast, where we have a fairly sizable book. I think the political environment there caused people to pause on investing for a period of time. We also had quite a bit of weather in the first quarter.

And so I think the start of construction projects has paused. We write a lot of our policies on a project basis. So it's very specific to when that project kicks off. And with the weather improving, we're hoping that we'll see more business buying as those projects do get kicked off here as we're into the spring.

On the West Coast, it's been a healthy spring. We do -- we have ramped up a bit our focus on project policies as opposed to a practice policy where we cover that contractor for the whole year with whatever they're doing and more contractors seem to be buying coverage in that manner. So we have seen some success in that region. So I think our channel -- our pipeline is full. We've got more quotes out there. We did have more quotes for the first quarter than we did last first quarter. It's just a matter of that business binding.

And so some of those quotes can remain outstanding for 6 to 12 months, and our wholesalers will keep us up to date on the status. And then we wait. Sometimes we have to revise those quotes when the time comes. But at other times, we are comfortable with those terms and go forward. So a bit slow. We heard from our wholesale producers that they were a bit slow in the quarter as well. So we feel like we're not an outlier there, but we are hoping that the construction industry does pick up a bit going into the rest of the year.

Okay. You mentioned in your earlier comments, too, about your plans for more state diversification in your personal umbrella book. Any early impacts you've seen? You took a pretty big rate hike in California there. Any early impacts of what's happened in California from that?

Yes. So our last rate hike in California was only effective on December 1. And we did get a 20% rate increase there. We are still seeing some growth in California, but it's at a much smaller pace than it was before. Keep in mind, we've made a few different changes to how we approach that business in California. A couple of years ago, we increased our attachment so that our underlying attachment is at $500,000 versus previously $250,000, but we've also selectively reduced commissions, and that's been a more recent change that is being digested by our producers now. And I would say that will -- that could potentially impact further that growth rate. However, the business seems to keep coming to us.

So we're not seeing a lot of activity by either primary carriers or other competitors that is too successful in that space. So it seems to be that the opportunity continues. We just want to buy that business on our terms and make sure that we're comfortable that the terms we're providing are going to equate to an underwriting profit for the book of business.

Okay. And then just lastly, you've talked for the last couple of quarters about the transportation claim count information coming down. I guess just to put that was advocate there, is there anything that would cause just more of a delay in the claim reporting and maybe pick up later? Or is that truly a reduction on ultimate counts that you think could happen?

I'm going to guess here because I don't know exactly, but I'm going to guess that they're down for a good reason. And part of that is that our policy count has reduced a bit, particularly in places like public auto where you have a bus and you might have multiple claimants impacted. So with a smaller policy count and again, continue to invest in loss control activities where we're monitoring those insurers and really trying to engage with folks who appreciate risk management and whether it's the telematics from the cameras, but then also training their drivers, reacting to what they're seeing in terms of their driver behavior.

And so with those things, I would say that probably is translating into the reduced claim count. So I think that's a legitimate data point -- but obviously, we continue to watch that over time. We can't control when an accident happens. We just -- we're going to respond to it when it does. So my answer is cautiously, I believe that's a real trend.

Our next question comes from the line of Mark Hughes with Truist.

I wonder if you could talk a little bit about the property business. You were still down this quarter, a little bit less than last quarter, though. I wonder, is the market still adjusting, which is to say pricing continues to decline sequentially? Is it at a point where maybe it might stabilize in the second half? How do you see that kind of near-term trajectory?

Yes. It's a good question. We're in the market every day, hoping that it becomes more stable. But I would say, at this point, we're not seeing signs of that yet. So competition remains healthy in that space. I don't know if healthy is the right word, but it remains very active. As you saw our rate decreases continue a bit, we individually underwrite that business. So every account we're looking at to see how can we win this account. And we look at the individual risk characteristics.

Now it appears that some of our competition probably have more global mandates on how they approach accounts. And so as an example, we might find an account where we think that the valuation is not up to date. And so we're going to want to put coinsurance on that account to make sure that when the loss happens that, that valuation is reflected in the results of how that claim is handled. Some folks appear to be kind of waiving those types of terms across the board. And so that's where it gets difficult to win that business. But in individually underwriting it, we can decide where does it make sense to waive certain coverages or exclusions and where it makes sense to be a little more aggressive and win that business.

And so one thing we try to do is to protect our renewals. We are increasing the limits that we're willing to offer a bit. Now we're not a big game player. We probably offer between $10 million and $20 million of limits for the most part. We can selectively go above that, but that's our kind of our sweet spot, where others I do have more limit. But I'll tell you, some of the brokers have determined that it's in their best interest to have multiple carriers on an account. And so in some cases, while we might want the whole account limit, they're trying to share that so that when the next hard market comes, they've got a nice variety of carriers to choose from.

So for us, again, it comes down to each account trying to battle it out to win that business if it's a good account. We are on the edges of moving some business to the admitted market, as I mentioned. Some of that, we call it E&S light business, where it's in the market for E&S only because it's located in Florida, for example. Some of that is coming back to the admitted space. So we recognize there could be an event and likely to be event this year, and some of that business then will flow back into our space.

And so we've been doing this a long time. We're not excited about being patient about the market improving, but we can be patient. That's what we do, and that's what we'll continue to do.

Understood. On surety, and I'm sorry if you did touch on this before, but reserve development, the favorable development in Q1, definitely still on the positive side of the ledger, but not quite as much as you've seen in the first quarter in prior years. Was there anything that you saw that drove that? Any particular claim or 2? Or what was the driver behind that?

Yes, Mark, it's Aaron. Both in my commentary and Jen's, we referenced the fact that results in surety can be variable around a small number of losses. Jen mentioned one particular loss on the contract side that was in prior years. So that was a headwind to the results we saw there. And if you look back at last year's release, it was a very robust prior year release in last year's Q1. So there's a comparable issue going on, and there's some loss activity as well weighing on this year's outcome.

Understood. And then just one clarification. I think you're talking about the heard from the wholesalers is a bit slower in the quarter. Was that on the construction GL part of the business? Or did I mishear that?

Yes, that was specifically for our relatable construction business through the wholesalers, yes.

Our next call comes from the line of Andrew Andersen with Jefferies.

Just looking at the casualty ex cat, ex PYD loss ratio and taking into account the $2 million of cat that you had mentioned, it seems like the casualty underlying loss ratio was up slightly. Would you characterize that as kind of just business mix? Or was there any change in loss trend assumption?

Yes, absolutely business mix more than anything else, Andrew. You think about where we're growing there, it's a mix influence.

Okay. And transportation growth was quite strong. And Jen, I know you talked about it a bit, but just despite a cautious industry backdrop, how are you kind of balancing exposure unit growth here with still severity concerns, recognizing you did get quite a bit of rate as well?

Yes, it comes down to risk selection. So our transportation team is part of a very strong feedback loop with both claim and then the data that supports what's going on in their business. They are committed to getting rate above trend for the year. And you can see they're demonstrating that they're doing it, but they're also being very picky on the selection. They tend to be picky regardless, but I think they're probably even more focused on it this year. They are finding some accounts that actually have good risk management where we can get the rate we need.

I mean this business, at least you have a little bit more transparency because people tend to have loss activity. You can see actual loss history per account, and you can evaluate what are their safety practices and what would be the cost of those going forward so you can loss rate these accounts, which is helpful. So we are winning a few pieces of business with a few folks pulling back in places. And I'll tell you, some producers are finding us helpful and so they're looking for more business that we can help them with.

So we get a lot of submissions in. We still declined 90% of the submissions that we received. So you can see still being picky. But we're considering that severity is up. We're looking at rate being adequate, but then it all comes down to that risk selection and picking the right accounts. And there's nothing magical about it. It's about due diligence, doing your underwriting, asking a lot of questions and not broad brushing it. And that's our approach. And hopefully, it will work out for the year.

Our next call comes from the line of Greg Peters with Raymond James.

This is Mitch Rubin on for Greg. In surety, with the large contract loss in the quarter, should we expect any further development on that claim in coming quarters? Or is the impact largely contained in this quarter?

I would say that we've reserved for basically the worst-case scenario on that claim. So I wouldn't expect adverse development on that claim. And I would also just reiterate that's a single claim, we don't see a systemic issue in the book. It is just one individual circumstance for a particular contractor.

Got it. And as a follow-up, some peers have pointed to recent softening in financial lines. Are you seeing similar pressure in your executive products or professional services books?

Well, the executive products group that focuses on directors and officers and other fiduciary other management liability coverages, it's been in the soft market for a couple of years now. I would say that market is actually stabilizing. If you look at rates in that book, they were actually flat for the quarter, which, in this case, is a win. I can tell you that there has been a little bit of consolidation among carriers in that business, which it would be nice if that translated into less capacity and maybe a more stable and even hardening market, but that has not happened yet. There's just a few folks that are buying each other out, but it hasn't impacted capacity.

In the professional line space where we write errors and omissions coverage, I would say that continues to be a very competitive environment, but we are winning business. We did see some growth in that space and a little bit of rate. So again, individual underwriting, long-term relationships with these producers who've been doing that business almost 20 years. So I would say it's a stable marketplace that we just try to get a few more new accounts each year, and that's kind of the trend that we've been on for several years now.

If there are no further questions, I will now turn the conference over to Mr. Craig Kliethermes for some closing remarks.

Well, thanks, Aaron and Jen, and thank you all for your questions.

Before we wrap up, I want to leave you with a few thoughts on how we're thinking about the business going forward. The current environment presents both opportunity and temptation. There are always ways to grow if you're willing to stretch. We also know that not all growth is created equal. Our focus remains on underwriting discipline, understanding the risk, pricing it appropriately, seizing market opportunities, and with a willingness to step back if conditions don't support our expectations for risk-adjusted returns. That approach has stood the test of time. It is how we delivered consistent results through the peaks and troughs of the market cycles. We don't expect it to get easier.

As Kara Lawson, the Duke's Women's Basketball Coach said, "It never gets easier. You just have to handle hard better." That is part of the job. The challenges are what prepare you for success. As we look ahead, we're optimistic, not because the environment is easy, but because we know how to operate in environments like this. Our ownership culture makes us different, and we're willing to do the hard work. We're staying true to the vision that has guided this company, building a strong community, helping our producers and customers solve real problems and taking responsibility for continuously improving and making RLI better every day.

We are proud of what we've built, but we're even more focused on what comes next. We like our position. We trust our process, and we're confident in our ability to deliver differentiated performance over time.

Thank you for your time and continued interest in RLI. We look forward to speaking with you again next quarter.

It looks like we had a couple of folks queue up while you were offering those final remarks, Craig. So we will afford a couple more opportunities to ask questions. Apologies for the back and forth.

Our next question comes from the line of Hristian Getsov from Wells Fargo.

I just had a question on the net retention in property that picked up 5 points. I just wanted to confirm that the uptick was purely reflective of lower reinsurance costs. And as we kind of get the midyear renewals, are you guys thinking about any changes from a reinsurance strategy just given the lower cost?

That's correct that the savings from reinsurance cost is why we retain more of our premium for the property business in the first quarter. For midyear renewals, what we have coming up is mainly on our D&O and errors and emissions coverages, so those professional liability coverages I just spoke about, that's coming up as well as a little bit of an earthquake cover that we have. So most of our reinsurance costs are renewed on 1/1, about 60% or so. We've just completed our surety renewal, and we have marine coming up.

So I don't anticipate any huge changes in reinsurance throughout the rest of the year. I think the reinsurance market is a bit soft. So it's definitely a buyer's market, but I'm not going to predict anything material in terms of change for those renewals.

Got it. And then I had a question on like just given the private credit concerns you've kind of seen in the market. Obviously, a lot of the MGAs out there are PE backed or backed by other forms of alternative capital. But have you seen any alternative capital maybe injections in the space start to moderate? Or you don't think that will really turn the market until we get a large cat event?

I don't know that it's necessarily moderated as a form of capital to the MGA space. But I will say that there are MGAs that have been backed by private capital in which that private capital is coming to the end of the life of its particular fund that, that MGA sits in. And so there have been maybe a few more opportunities showing up with MGAs that we would like to exit and move on to new ownership. But that's the influence that we see.

Got it. And if I could just sneak one more. For the increased admitted competition that you guys flagged, is that dynamic mainly on the property side? Or is there any other lines, particularly in casualty where you're also seeing an increased level of activity?

We're seeing it a little bit on the casualty side, not to the extent of property, but we do see where for some of our contractors where we're being a little pickier on the auto coverage for some reason, some standard markets say we like the GL, and so we'll cover the auto as well, and we might lose it for that reason. I wouldn't call that a material impact on our book, but we're seeing that on the edges.

Our next call comes from the line of Meyer Shields from Keefe, Bruyette, & Woods.

Aaron, is there any way of quantifying the large surety loss, just so we can get a sense of what the underlying results are like in that segment?

Can you ask that one more time? It was around the large surety loss.

Right. I was just looking for a quantification, so we can see how underlying results are.

If you look at our retention around surety today, that retention is $5 million.

In terms of reinsurance.

Yes, in terms of reinsurance picking up any additional loss, and that's where Jen fit her comment in around any further development being somewhat contained.

Okay. That's helpful. The second question, and I'm not sure that this is a legitimate one, but we've seen property premiums declining for a few quarters. The underlying operating or underwriting expenses are still going up. And I understand that underwriters are going to be retained. But are there any opportunities worth pursuing so that assuming that premium volume in that segment keeps falling, you don't have a consistent upward headwind of underwriting expenses?

We are -- so Meyer, we are always looking for opportunities. And I would say our E&S property underwriters are out. We've had a number of events and just one-on-one meetings with producers to look for other ways to participate in that marketplace, and there are some and that we're hitting on some of those. It's not enough to offset some of our main business, but it is there.

And I'll say we're also looking just more broadly. Obviously, Marine is growing and Hawaii homeowners to help round out our property exposure because we do think the property is still well priced in general. So kind of using the tools within the business unit, but also outside of the business unit to make sure that we're seeing enough business and trying to offset some of that decline.

Ladies and gentlemen, if you wish to access the replay for this call, you may do so on the RLI homepage at www.rlicorp.com. This concludes our conference for today. Thank you all for participating, and have a nice day. All parties may now disconnect.

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, our alliance 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 10-K as supplemented in Forms 10-Q, all of which should be reviewed carefully. The company has filed a Form 8-K 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 and 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 8-K contains a reconciliation between operating earnings and net earnings. The Form 8-K and press release are available at the company's website at www.rlicorp.com.

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

Good morning, everyone. We appreciate you being with us today, and I'd like to introduce Aaron Diefenthaler, our Chief Financial Officer; and Jen Klobnak, our Chief Operating Officer, who are joining me. I'll start by saying we feel very good about where RLI Corp 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 worked 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 RLI. 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.

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. 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 1 of our release and in the non-GAAP disclosures on Page 2, 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 continue 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 continue to grow.

Properties underwriting profitability was supported by $17 million of favorable loss emergence on prior year's catastrophes, modestly offset by $4 million of storm activity in the quarter. Inclusive of these net benefits properties 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 underlying -- underwriting results included $2.7 million of favorable loss emergence from prior years, which improved surety 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 a 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 closed in 2025.

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

Thank you, Aaron. I will dive right into our segments, 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. E&S property premiums decreased by 18% on an intense competition from other carriers and MGAs along with increased risk retention in some areas by insurance.

Hurricane rates were down 15%, while submissions continue to grow as insurance shop for 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 insurers saw rate relief or decided to retain the risk. We see carrier competitors in the E&S 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 E&S property team delivered a meaningful underwriting profits despite challenging market conditions. We 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 see 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 had 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 customs 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 casual segment premiums 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 seats where we have taken larger rate increases, required higher underwriting -- I'm sorry, underlying limits and works with our distribution partners to improve the quality of our book.

The personal umbrella market continues to present opportunities as our competitors responded to deteriorate results by adjusting their appetite and terms and conditions. Our continuous product collaboration supported by intensive 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 seems to be new markets entering and pushing for growth. Acute pressure on the largest size accounts has led to a decrease in our average account size over the last 2 years.

Our in-house loss control team provides an advantage as they assess and try to improve the safety of our insurers, 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. Premium 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 E&S casualty team also produced an underwriting profit for the year. We saw increased competition in the fourth quarter, particularly on larger 6-figure premium accounts due to competitors 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 2/3 of our annual reinsurance spend. It was a buyer's market for property. We secured 15% to 20% rate decreases on our catastrophe programs 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 attributes. For the full year, we achieved modest growth while producing an 84 combined ratio. While E&S property prudently contracted in response to softening market conditions, other teams capitalized on opportunities, most notably personal umbrella, E&S 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'm 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.

[Operator Instructions] Your first question comes from Michael Phillips with Oppenheimer.

The accident year loss ratio in Casualty improved a bit from last year is once you back out the reserve addition you did. Can you talk about how much of that was because of the mix shift from pulling away from transportation book versus anything else that might have caused that improvement?

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 auto-related coverages, both in our transportation and our personal umbrella product. This year, as we looked at losses coming in, we did not see the need to take such action. And so you did see that improvement. I can't quantify specifically the difference. Aaron?

Yes. 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 year 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 our incentive structure is set up for those business leaders to pull back from those markets when they see underpriced competition coming to bear on Submission activity. So everything is set up for there to be a natural pullback from markets 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.

Okay. I guess on that last year's reserve addition, I mean I think it was from higher severity in umbrella and transportation. And this year, you've seen a bit of -- 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 of that reserve addition was because of the accounts that you've now subsequently lost from midterm cancellations that you 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?

Yes. Well, it's hard to get down to the account level when you're -- 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 rightsize that for a small proportion of the prior year catastrophe activity as well to get closer to that $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 some challenges around auto-related exposures, all of that being maybe to a lesser extent than what we saw in the year ago period.

Yes. To supplement that, I would just add that there are many metrics that you can track to see what direction you're headed. And I'll tell you 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.

Yes. Okay. Perfect. That's helpful, Jen. I guess just switching gears, last question on the Property side. I mean last time, you talked a lot about how you've 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 the expense ratio in Property over the next year or so?

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 would 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 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 you business. So there's a little bit of -- we still need to keep investing in supporting that.

Our next question comes from Hristian Getsov with Wells Fargo.

On the property competition, I guess, what needs to happen in the market for us to see an inflection in the rate decreases, at least like moderate from here? Is it -- it's like thinking about it, 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 and profitability we've seen in the line?

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 greater space, anything of that nature that would reduce capacity would be beneficial. Having said that, 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 1/1, it could soften further. And so again, looking for either a large cat 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 wholesalers they work for. So that's one factor, but we also see carriers that have aligned interest being responsible. And so we don't mind competing against those people. That's a fair playground.

It's where capital providers that don't have aligned interest. 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 MGAs 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 that are multiples and multiples of what they were able to provide in terms of capacity last year. So 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 moved in the spaces where we know we have a chance of the business.

Got it. 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 mutual? 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 umbrella.

Yes, I'm a fan of the [indiscernible] commercial. But other than that, I would say the personal 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 them in the press. And we do partner with some of those same carriers to offer our personal umbrella when 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 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 what they need and how we can service that business. So I feel pretty good that we have 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 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.

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 in states like Georgia on loss trends?

I'll tell you that in Florida, in the last year, we have actually tried to slow our new business 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 rate attachment points and curtailing some of the production we want from certain producers, we haven't really seen an impact from that specific regulations just because we're more controlling our growth at this point in that state.

On the other side of it, I'll tell you total reform 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 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 insurer 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. 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 personal umbrella as well as broader auto coverages.

Your next question comes from Andrew Andersen with Jefferies.

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 2 years, 98% reported combined ratio, a little bit uncharacteristic to have that 2 years in a row. And I realize there were some headwinds 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?

Well, Andrew, I think as we've characterized the product level rate increases we've gotten within the Casualty segment, we think that's probably the strongest foundation we can offer in terms of data itself. 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 it's hard to say the exact point in time where 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.

Yes. 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, we're not acting -- we tend to be pessimist. 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 I think of a trend before we're going to recognize it for sure.

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 go in the other direction, we obviously like to try to get that up as quickly as possible. So that's the way we look at things.

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?

Well, I would say that everybody wants premium. So it's a fight out there, but I would say the other E&S 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 -- it would at least stabilize, which would be great.

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?

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

Your next question comes with Mark Hughes with Truist.

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? Is there -- I know it's certainly more challenging year-over-year, but has it stabilized at all? Or is it still under incremental pressure?

That's a tough question. You're getting pretty granular, I would say. Every month, we -- obviously, we look at it on a very regular basis. And each month, we -- if it's good news, we hope it begins a trend. If it's down, we are like what's going on. So I don't know that I should provide color on a monthly basis. I'll tell you that in the fourth quarter, that's our smallest quarter for renewals. I mean there's just not as many renewal dates out there.

So it's a tough quarter to really conclude about anything. If 1/1 is a big date and then in the spring 4/1, 5/1, 61, 7/1, 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 any 1/1 color on renewals probably provide 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.

Yes. And then the -- thinking about the lower reinsurance costs, would you say pricing was already incorporating that? There seems 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?

Well, as we prepare for our 1/1 renewals, we did contemplate a bit of a decrease in our cost. And so we built that into our benchmark pricing, which indicates 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 relief last year on 1/1.

So 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 because that's when some MGA relationships renew their capacity. And so we may see further change in behavior at that point in time, but that's yet to be determined.

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

Well, 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 1, we did get a California rate increase of 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 will be nice to, again, look at results to see which states require rate, where we're not getting adequate rate and where are we?

Those analyses are underway already. And so we'll conclude in the next couple of weeks if we need to start taking additional action. But just based on these 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.

Our next question comes from Meyer Shields with Keefe, Bruyette, & Woods.

Jen, when you talk about lower auto claim emergence, is that across accident years? Or was that an accident year 2025 comment?

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

I was just going to say, I think we did see a reduction last year as well, so 2 years in a row.

Okay, that makes sense. I just want to make sure that I 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?

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

Okay. And then final question. Just -- you mentioned, 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 comment a lot. I'm just trying to get a sense of how material you think it is in the market?

I mean, overall, the fourth quarter is always challenging, and our underwriters always say, oh, other people -- and it's legitimate, other people are compensated on top line directly, sometimes not even compensated 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, that's 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.

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

Sorry, I didn't follow that.

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.

Well, it's too early to ask. Yes, we haven't closed January yet. So it's hard to see -- I see a partial -- a partial month is all I have right now.

Your next question comes from the line of Carol Bruzzese with Philo Smith & Co.

Sorry, it's James Inglis. 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 just sort of a normal thing -- time to figure out what the cats actually ended up as? Or is there something specific or unusual in there?

Not unusual, Jamie. This is Aaron. 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 results 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's prudent to take down some of the IBNR. Those were not the only events that were incorporated in that analysis. We have cat activity going back over several years that we examined and 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.

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

This is Mitchell Rubin. You referenced the 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?

Yes. Mitch, this is Craig. So I'll speak to that. So -- I mean, we anticipate to 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 10%, 15% increases in their insurance or they can't afford to pay 10% to 15% increases in their insurance.

So at some point, there's going to be a breaking point where we'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 expect 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 going to try to continue to get 10%, 15% increases on auto business going forward until we see that loss cost trend subside.

Great. 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 bind ratios within the transactional surety business?

Well, I would say our investments in technology have done a couple of things. I focus 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've 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, in surety, we're rolling out an upgrade to our current offering. We've been in that business since 1992. As you can imagine, 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 will be very helpful to them. So really kind of that customer experience and getting business in the door has been a big investment. Our 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, they can mean inputting various e-mails that come in regarding claims go straight into claim files. So that we have to look at them and decide where they go, updating 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, 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 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 insurance drive 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 3 big buckets that we have focused on. And I would say, 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 line.

There are no further questions at this time. So I will turn the conference over to Mr. Kliethermes, RLI's President and CEO, for some closing remarks.

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. 30 years ago, RLI was a very different company. We wrote about $270 million of gross written premium. Roughly 1/3 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 representing 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 that 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 coworkers and our shareholders. Our founder like to say that great companies are built one good decision at a time and that those decisions never seem easy in a moment. That philosophy has served RLI well for 3 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.

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

Good morning, and welcome to the RLI Corp. Third Quarter Earnings Teleconference. After management's prepared remarks, we will open the conference -- Before we get started, let me remind everyone that through the course of the teleconference, our line 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 10-K as supplemented in Forms 10-Q, all of which should be reviewed carefully. The company has filed a Form 8-K with the Securities and Exchange Commission that contains the press release announcing fourth quarter results.

During the call, our management may refer to operating earnings and earnings per share from operations, which are non-GAAP measures of financial results -- 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 -- 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 8-K contains a reconciliation between operating earnings and net earnings. The Form 8-K and press release are available at the company's website at www.rlicorp.com.

I will now turn the conference over to RLI's Chief Investment Officer and Treasurer, Mr. Aaron Diefenthaler. Please go ahead.

Thank you, Adam. Good morning, and welcome to RLI's Third Quarter Earnings Call for 2025. Thanks for joining us as we head into the home stretch of the year. We've got our usual lineup on deck, Craig Kliethermes, President and CEO; Jen Klobnak, Chief Operating Officer; and Todd Bryant, Chief Financial Officer.

Here is the game plan for today's call. Craig will kick things off with big picture perspective. Todd will run down our financial results and Jen will follow with commentary on market dynamics and our product portfolio. After our prepared remarks, we'll open the line for questions, and Craig will close with some final thoughts.

With that, let's get started. Craig?

Thank you, Aaron, and good morning, everyone. We appreciate all that are participating in the call and look forward to your questions once Todd and Jen have had an opportunity to give you an overview of our results. We are pleased with our third quarter results, which include an 85 combined ratio with underwriting profitability across all segments. 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.

The top line continues to be relatively flat, largely due to changing conditions in the commercial property catastrophe market over the last several years and the significant softening that is now occurring. While this presents a headwind to current growth, we look at it as a reflection of our willingness to grow when the market is in our favor and dedication to our hallmark discipline and softening markets.

We still have good underlying growth within most of our very diversified niche product portfolio despite the reset in the property catastrophe market. A significant amount of that growth is driven by rate increases in our cash businesses. The industry continues to face a complex environment marked by increased market volatility, political uncertainty, alternative and inexperienced capital providers, entering use spaces and persistent legal system abuse.

However, disruption creates opportunities for those with a steady hand and a deep expertise to navigate a rapidly evolving landscape. Vigilance, underwriting discipline, and adaptability are critical to long-term success. At RLI, we value being a stable market to our customers and consistency of financial results overtaking outsized tail risks. We also know we must keep investing in the best information placed at the fingertips of our expert underwriters and claims specialists at the time of decision-making to continue to outperform. This is ingrained in our unique ownership culture, and it is what we will continue to focus on as we have for the last 60 years.

With that, I'll turn it over to Todd, who will provide some detail on our financial results.

Thanks, Craig. Good morning, everyone. Yesterday, we reported third quarter operating earnings of $0.83 per share, supported by solid underwriting performance and a 12% increase in investment income. As a final reminder, per share data reflects a 2-for-1 stock split that was due to shareholders at the end of 2024 and distributed in -- underwriting income benefited from continued growth in earned premium and positive results on the current accident year were complemented by favorable development on prior year's reserves across all 3 segments. Our total combined ratio was 85.1%, down from 89.6% last year. The improvement is largely reflective of the benign hurricane season experienced thus far in 2025.

Like last quarter, on an overall basis, our top line was flat compared to the prior year, but our casualty segment continued to grow nicely from both rate and exposure in areas our underwriters see profitable opportunities. Property was challenged given increased competition and rate pressure on catastrophic exposed business, the returns on this business remains strong.

On a GAAP basis, third quarter net earnings totaled $1.35 per share versus $1.03 per share in Q3 2024. The underwriting and investment income as well as realized and unrealized returns on the equity portfolio, all outpaced amounts posted from the same period last year.

Turning to segment performance. Property experienced an 11% decline in gross premiums, which was influenced by the rate and exposure declines in E&S property. In other parts of the property segment, Marine was flat for the quarter but up 4% for the year, and Hawaii homeowners continue to deliver growth, up 33% in the quarter and 35% year-to-date. Jim will provide additional detail on subsegment market conditions shortly.

Properties bottom line benefited from an absence of hurricane losses and $5 million in favorable prior year's reserve development, primarily on Marine. On a comparative basis, Q3 2024 included $37 million of storm and catastrophe losses. These losses were partially offset by $8 million in reduction to prior year's reserves inclusive of catastrophe-related amounts. Attritional losses were up modestly in the third quarter of 2025. Over the 26 loss ratio, we are very pleased with the segment's results. All in, property continued its strong performance, posting a 60 combined ratio in the quarter.

In Casualty, gross premiums advanced 8%, and we posted a 98% combined ratio for Q3. The segment benefited from $8 million of favorable prior year's reserve development and the improved current exit loss ratio compared to last year. You may recall that current accident year results for the third quarter last year were impacted by reserve additions to yield-based coverages as well as hurricane losses within our package business. [indiscernible] reserve benefits were realized across a number of products with notable contributions from general liability and excess liability.

Sureties gross premium was down 3% over last year, driven by modest declines in commercial and contract. For the year, commercial and transactional sale are up 5% and 3%, respectively, while contract is down 5%. Result per contract was influenced by a slowdown in small to mid-market construction activity. The combined ratio for the quarter was 85%, and underwriting income benefited from $2.7 million of favorable reserve development. The expense ratio rose, reflecting higher acquisition costs and increased investments in technology and people.

On the asset side of the balance sheet, our investment portfolio performed nicely as stocks and bonds rallied in the quarter, offering a 3% return, total return and a solid contribution to comprehensive earnings. Operating cash flow of $179 million and select sales of fixed income assets over the last 3 months, facilitated purchase activity with average yields of 4.8%, a 70 basis point advantage to our portfolio's current book yield. Beyond our traditional invested assets, investee earnings totaled $1.5 million in the quarter, incorporating comprehensive earnings of $1.65 per share and adjusting for dividends, Book value per share increased 26% from year-end 2024. All in, we are very pleased with our third quarter and year-to-date performance.

And with that, I'll turn the call over to Jen. Jen?

Thank you, Todd. The Property segment delivered a strong 60 combined ratio, while premium declined 11% in the quarter. From a profitability standpoint, all products within the segment are performing well, and we continue to find opportunities for growth. Hawaii Homeowners is a great example, where premium was up 33% in the quarter, including a 16% rate increase. The market has been disrupted since the mine wildfire, and we have been taking advantage over the last couple of years. We have an improved rate filing effective this month that we expect will add 12% rate to the book over the next year. We're working on several initiatives for process improvements and automation to help increase retention by making it easier for agents and insurers to renew their policies.

Attritional loss ratio has been steady, and we appreciate the team's contribution to results in the quarter. Marine has made a notable contribution to the bottom line again this quarter. The top line was flat given choppy economic conditions and increased competition in the market, particularly for cargo exposures where we have intentionally shrunk the book. The division broke their top line growth stream but kept the more important street selling. They're working on their eighth consecutive year of underwriting profit.

E&S Property continues to provide a significant contribution to our bottom line, while premium was down 20% for the quarter. To add some perspective on the scale of this business, we've written over $350 million in premiums through 9 months which alone represent the third largest production year ever, other than the last 2 years. During the last hard market, we leaned into this space in a sustainable way, meaning we invested in our producer relationships, enhanced our form set for flexibility and added more claims capabilities to service a larger book of business. Those investments provide a strong foundation to lean into other property market opportunities as they arise.

New capacity has been entering the market ever since Hurricane Milton -- its target last year. They are chasing top line growth at the expense of portfolio quality. We remain selective -- our renewal rates for wind are down 11% in the quarter, but remain around 2.5x higher than they were prior to the hard market in 2019. Our renewal retention is down a couple of points and new business is highly competitive.

But the hurricane season is not over yet. Our exposure is down almost 10% for the year. We are comfortable that if and when an event occurs, we'll be able to handle the influx of claims and remain a reliable market to our insurers just like we've done in the past. [ Earthlike ] remains highly competitive as well, with many insurers choosing to retain this risk. Our submission count is down about 5% accordingly. Rate on renewals are down 9% for the quarter. We are prioritizing maintaining a well-priced book with sustainable terms and conditions over volume or market share.

We have been investing in underwriting talent, exploring new producer relationships and building out product offerings to be ready when the market turns. We expect E&S Properties underwriting profit for 2025 to exceed what we used to write in top line premium. This demonstrates the success of leaning into the hard market.

The Surety segment posted an 85 combined ratio with premium down model for the quarter. While we're navigating some economic headwinds and our commitment to sound underwriting and long-term results positions us well for sustained success. In the construction space, spending is down where we provide -- primarily in the small to mid-market public construction projects.

Mixed messages from the government early in the year and budget constraints more recently have tempered bid activity. Although the average size of the projects we've been able to buy is reduced from last year, our teams continue to find quality opportunities that align with our underwriting standards.

Our commercial Surety premium was also challenged by a slowdown in energy renewables projects. The perception that profits are easy to make in the surety business has led to a proud and highly competitive landscape. There has been some industry loss activity in both contract and commercial surety that may bring more balance to the market, potentially creating opportunities for disciplined players like us. We're confident in our strategy. Our investments in experienced underwriters can attract new accounts and newer underwriters to perpetuate our expertise are helping counteract these headwinds.

We've made investments in processes and systems in our transactional surety offering, which is freeing up underwriters' time for marketing and decision making. These investments will pay off over time, especially when market conditions were us leaning more heavily into growth opportunities in this space.

Cash at premiums were 8% on a 98% combined ratio for the quarter. One of the highlights is the performance of our E&S Casualty Brokerage group, who is responsible for an improving underlying loss ratio and a large contribution to the reserve release for the quarter. E&S Casualty Brokerage premium grew 12% and with a few more opportunities on the excess side versus the primary. Submissions were up around 20% for the group.

Some standard markets have pulled back, particularly in the Northeast, which has created some opportunities, although not all of the business matches our appetite. There is the construction we focus on, for example, office renovations are growing -- showing some growth this year. We're also staying in front of our producers on a regular basis, which continues to drive new business submissions. We have a strong pipeline of full new project business around the country that we're waiting for -- decreasing interest rates will help financing move forward on these projects as this group focuses on private construction business.

An area we continue to monitor closely is our auto exposure. Our transportation division premiums was down 1% for the quarter, while we achieved 15% rate increases. Competition remains fierce in this space despite the severity trends experienced in the industry. While a couple of our largest renewals have shopped their policies midterm and canceled for lower cost alternatives, we remain focused on writing profitable business and leveraging our underwriting discipline to grow where it makes sense.

There are still pockets of opportunities, particularly in the public auto industry. We're hitting on these where our in-house loss control identified accounts with acceptable safety practices and we can get the rate we need.

Our transportation staff is collaborating with our package businesses where we offer auto coverage. Our loss control team has expanded services to these other divisions where it makes sense. Auto liability rate increases across the portfolio totaled 16% for the quarter, up from 14% last quarter. Our actuaries and claims staff provide helpful feedback to our underwriting teams to ensure they understand what is driving where loss trends are coming in. We've already seen the benefit of this feedback move among our sports and between business units. First umbrella continues to drive our top line growth in the casualty segment.

Premium increased by 24% in the third quarter. This includes a 17% rate increase. New business count has slowed a bit as we implemented higher minimum attachment points in our largest states. We've received approval for additional rate increases effective this quarter, and we'll continue adding rate book well into 2026. We believe our approved rate increases are outpacing loss trends, which provides a strong foundation for our growth strategy.

Overall, while the top line was flat this quarter, premium was up 2% for the year in an environment where many business units are experiencing increased competition and softening terms and conditions. Taking a longer view, we have doubled our premium in the last 5 years while significantly increasing our capabilities. We have invested in systematic ways to gather customer feedback. Translating into meaningful business improvements from simplifying online applications to expanding partnerships across business units and introducing new products.

We grow new offerings slowly to ensure we have the coverages needed at an accurate rate with processes that will support the producers and insurance to select us. Some examples of these coverages include a moving and storage focused transportation division, autofiscal damage coverage and marine and admitted storage tank coverage as part of our environmental liability offerings. These small products add to the diversity of our portfolio and will provide more opportunities to grow as market conditions change over time.

We have also invested heavily in continuously improving the products and services we offer as well as the processes that support them. Sometimes that means simplifying how we work, other times they means embracing automation. Currently, we are focused on identifying and implementing generative artificial intelligence where it have value. Our creative employee owners have already introduced many tools that are reducing the time it takes to serve our business. We have armed our underwriters and claims staff with better information to support their decisions and we're just getting started.

Finally, we've invested in our community of employee owners, producers and other business partners by increasing training for our staff and investing in the partnerships we formed so we can be a stable carrier in all phases of the market cycle. These investments may not show up in a single quarter's results, but we believe they will translate to long-term profitable growth over time. We look forward to continuing to invest in the long term as we strive to achieve our 30th consecutive year of underwriting process.

And now I'll turn the call over to the moderator to open up for questions.

[Operator Instructions] And our first question comes from Michael Phillips from Oppenheimer.

You've talked about recently how you've raised your attachment points on the post umbrella book. I think recently in California and then maybe more recently in Florida, clearly 2 of your biggest states there. Can you talk, I guess, about what that -- what you've seen that has done to your margins in that cross-unbrella book? And then also just kind of a quick follow-up. Where are you in the process in Florida?

Yes. So we've been at a higher attachment point in California for over a year then, and we recently towards the beginning of this year, implemented that in Florida. So moving from traditionally a $250,000 attachment porting as an example up to a $500,000 attachment point required for new business. We added in September 7 additional states where it's just our larger states that we're seeing, again, a little more frequency as those claims start to breach the more often, the $250,000 level. So moving up to the $500,000 level, we think that will help from a frequency standpoint to some extent.

Now some of those changes, as you can tell, are fairly new. So it's pretty early in the book. But in working with our underlying carriers, we are taking advantage already of seeing better talent and the underlying claims staff are handling those claims as they have more money in the game. And we are seeing that overall, our loss trends are improving on the book from this change as well as the other things that we've implemented over the last 12 to 24 months.

Okay, Jen. Sticking with post umbrella for a second, I think you said a 17% rate increase there this quarter. I hope I heard that right. which seems like a bit of an inflection from the last couple of quarters. Is that just a function of states where you've taken them? Or I think last query said 9, so it's a pretty big change there. So kind of what's driving that?

Yes. So how that works is we've got to file in all 50 things. And so in any individual quarter can be influenced by a particular state coming online. For example, our Florida rate change was really effective this quarter, and it was substantial. And so that influenced that pickup in the rate change. Whereas last quarter, we didn't have too much notable going in. So it's just kind of earning in from previous rate filings.

Okay. Yes, perfect. And then lastly, Jen, I stick with your comments. Right before you started talking on the casualty about the auto exposure, you made a comment about some standard markets are pulling back. I think you said particularly in the Northeast. I wasn't clear what you were talked about there. Can you clarify that?

Sure. There are some other markets in the Northeast that we're covering more artisan contractors, and that's not really a target for us on the primary side, but on the excess side of our unit Casualty Group, we do offer that coverage. And so some of those insurers meet our risk appetite on built. So we do see more submissions coming in and are hitting on some and that's a positive trend in our books.

Next question comes from Mark Hughes at Travis.

Surety -- the expense ratio, I think you talked about technology and some additional personnel expenses. Where should that head from here? Is this a good level for that surety expense ratio? Or will it perhaps taper off in the coming quarters?

Mark, it's Todd. I think we'll see as we continue to invest from that standpoint. We talked last quarter, Jim mentioned kind of the digital side, the customer relationship management all of those things. I mean, that has continued, and we're continuing to invest there. So I mean you're right itself a decent amount -- there's a little bit of pressure on commissions, I would say, not a lot, but some, but that overwhelming influence in the quarter and really year-to-date is from those investments in technology and people.

The other thing to kind of take a look at. I think if you look on a relative basis to written premium, you're going to see it look a little higher on a written basis in the quarter than on a year-to-date basis, but some of that is how we reinsure see there. But we're going to continue to invest there.

Understood. How would you describe the property market now? It's obviously been in the state of flux, a lot more capacity coming in as we're getting near the end of the storm season and looks pretty clear. Is there a risk of kind of another step function in terms of competition? Or perhaps, on the other hand, as it stabilized? How would you characterize it kind of in the near term here?

Yes, this is Jen. I would say during the season, a lot of times, whatever strategy people start with they kind of stick with. But as the season progresses, we get towards the end where it appears to be quiet, even though there are -- there's some talk of some interesting ways out there right now. There are people who are continuing to soften the market conditions. And we're seeing everything from admitted markets stepping up in the Midwest, where the issues from the -- several years ago have faded and so they're coming back into the market a little bit to MGAs and other programs that are affecting the coastal states. Where they're decreasing rates and deductibles and expanding terms and conditions in our California market where U.S. market has set are just adding in if they're writing a fire quality, they might just -- because that will help them keep the policy.

So we've seen that behavior as well. So there's tough market conditions down there. The key for us is that -- even in the hardest market, we stayed open for business for new business from our producers the whole time. And we work with them to try to develop solutions when they could find capacity. And that has really trickled into the current state where those finishes appreciate what we've done and they continue to help us find new business and to give us a last look on our renewals. And so that is helpful. I think we will continue to look for getting adequate rates and sufficient terms and conditions, though we'll understand what the claim will be if that claim happens. And so that's where we're focused on maintaining terms of conditions that we're comfortable with.

So the market could continue to fly, which will pressure our book, but we're seeing a lot of opportunities around the country on individual accounts that we can take advantage of, and we'll continue to do that. It's a fight out there, but we're up for it.

Mark, this is Craig. I would just add one thing. Obviously, a lot of reinsurance renewals are 1/1. And depending on what happens in the reinsurance market could -- we'll have a big influence on how competitive the market guests.

The next question comes from Meyer Shields at KBW.

Great. Servicing on the same topic. Jen, you mentioned, I think, 11% win rate decreased in the third quarter. What was that in the second quarter? Is something just like scale where we're trending?

I think you said the win rate decrease. It was 11% this quarter and 13% last quarter. It's 13% year-to-date. So you can see -- it just depends on what you're buying in a given quarter on your renewals.

Okay. Fair enough. When we look at the reinsurance costs for Hawaii Hurricane, do they tend to follow pricing trajectories for Florida wind?

I would say Hawaii Hurricane isn't an emphasized risk by the reinsurers. I mean it is absolutely diversifying from Florida, the probabilities for that event to happen are lower given the geography in Hawaii. It's just where it's at -- and so it's not a huge topic of conversation with the interest renewals. It's very much lump in, and Florida is really the focus.

I was just going to say hurricane is not a huge -- for us just because the way that is sold out there, that's typically in a more -- they buy it, they can buy it separately from their homeowners product. So there's a lot of cat-only players out there that will write the hurricane exposure in California -- in Hawaii, sorry.

Yes. I note on that. I mean, only about 20% of our Hawaii book actually buys wind coverage from us. So it's a much smaller exposure for us relative to the entire Hawaii book.

Got it. That's very helpful. And just maybe a broader question. There seems to be a little bit of turmoil in the wholesale brokerage market because we've got, I guess, Howden looking to build a U.S. retail platform -- can you talk about what that means for ROI like you treat and opportunities in that?

Yes. So our business model, as you know, is to partner with our producers to try to help them grow and help us out, right? And so we do invest in our relationships, I'll say at the underwriter's desk, which means we encourage our underwriters to typically meet with our producers. That's a line broker, a line underwriter meeting on a semiregular basis, in person, they tend to become friends or at least to be well appointed, so that the relationship is strong at that level. And then we reinforce that relationship as it goes up the line so that people like Craig and myself hang out with folks from the brokerage as well.

Any time of expansion, there's a lot of turmoil, the wholesalers that are more mature here in this market. We'll be trying to hang on to their people, but it's a very fluid market with people moving around all the time and it feels like they're moving around a lot right now. Obviously, housing is driving some of that. So we're happy to do business with any wholesaler that we think has a profitable book of business that we can work together on. We also want to protect our relationships that we've had. I mean we're committed to people who have grown with us over the decades. And so it's kind of a mixed bag there, but that's part of what we do is to just invest in nations that we think will make sense for us and for them.

The next question comes from Jamie Inglis from Philo Smith.

I wanted to follow up on Mark's question about the expense ratio and acquisition costs specifically. It seems as though acquisition costs are rising. Is that -- is that a retail phenomena wholesale phenomenon, product line, geography? What do you think is behind that?

There's a number of things, really. I mean I think the -- if you think of some of the smaller risk that we write, you think in terms of transactional surety really from a premium standpoint, personal umbrella there's pressure there, certainly, that has been happening, and it hasn't changed. And really, if you're trying to look at it on a segment basis, as we drill that envelop book, which is a great book for us, it comes at a slightly higher commission rate than the rest of the casualty segment.

Now we do push back from that standpoint to our underwriters we're always looking to find that right balance. But the other thing on the acquisition, when you pull it all together and think in terms of what we talked about investments in the technology investments and the people are underwriters, really, that's all part of the total piece of what it takes to put things together. So those are all moving up a bit.

Got it. Got it. I wonder if you could touch on the surety business generally in the competitive environment. I mean, you guys have had great results for forever. And and as you pointed out, there are others that are -- that see that as easy or coming into the market. How does -- at the end of the day, RLI maintained its sort of competitive advantage in the market?

Yes. So our -- sure book is made up a few subsegments, I'll say. So if you start with the transactional share, which is the smallest account One of the most around our business is really our technology and our servicing of our producers. And we've spent a lot of time, effort and dollars in connecting with our producers to understand how to make this the easiest businesses in. We should be the easiest provider. And so we -- we're rolling out something in the fourth quarter to, again, up our day in that respect. And so it's a continuous effort to understand how to get that business in as easy as possible.

I think from the account level side, which is both contract and commercial, some of our competitive advantage is really our people. We have some very dynamic experience folks who are focused on servicing the business. So they are extremely available for their producers. They are willing to listen to the story and try to come up with a solution they meet with principles and brokers all the time, they welcome training people brokers up just to help perpetuate that next generation to help that agency. So there's a number of things that we focus on around service, I would say, in the account space, that's really our competitive advantage. We're not the biggest surety. We don't have the biggest capacity -- and so we can't compete necessarily on that. And so we have to find other ways to differentiate ourselves in that market.

Jamie, I would just add more broadly than just surety. I mean I think our people are problem solvers, the type of people that we hired as owners, you're trying to solve problems to try to make your business better. I mean the comment -- the most common comment I get from producers when I meet with them as the additives they define are underwriters and the people they deal with are authentic and genuine people. They'll tell them if they can -- they will do everything they can to try to solve the problem. But if they can't, they won't waste their time by saying maybe and then tell them 3 weeks later, no.

And we think -- so when we say relationships, that's what we mean when we say deep relationships with people. At the end of the day, these producers like doing business with people they like. and they tend to like our people. And that's a huge competitive advantage for us, we believe.

The one other thing that I probably should have added earlier, but when you think about the discussion and the question used to ask, where is it going? Where is that acquisition rate going? That's a fair question. But the concept behind a lot of this, whether it's relationships that Craig and Jen mentioned or the technology investments or in our people, the idea there is that will all translate into more premium, more business. So we would leverage all those investments. So that's where it gets a little challenging to say where is it headed? Well, it's all designed to increase top line. revenue. So that's a big part of everything we're doing that too.

I would just say it's for a profitable premium time, but that's not [indiscernible].

Great. I appreciate it because it's also the trade-off with acquisition expenses versus loss ratio, which matters as well.

[Operator Instructions] The next question is from Andrew Andersen from Jefferies.

Looking at the casualty underlying loss ratio in the quarter about $6.5 million a little bit better than first half '25 results. Can you maybe just talk about some of the drivers there? Was that just mix shift? And do you view that as a kind of a good run rate into the rest of the year?

Yes, it's Todd. As you look and compare to last year, I think I mentioned it in my opening, a lot of it's had influence on the current accident year last year. Where we added to U.S.-based exposures. You do have a little bit of a benefit this year. When we look at the current accident year, the actuaries view that they make any change they're going to look all the way back to the beginning of the year. We had a little bit of benefit of some of the property coverage in that package business, but that's pretty small that has a minor influence on the current loss ratio. It's really more of a story of last year and the adverse that we added from the base coverages.

Got you. And maybe sticking with the transportation I think to '24, you're growing quite a bit in this line. And then the second quarter, you've started to cut some exposures and continuing into the third quarter. Kind of where are we in the a re-underwriting of this book or maybe just being diligent around rate and exposure units.

Yes. This is Jen. I would say it is more about being diligent, but the other factor is that some of those larger accounts that we wrote last year in a -- midterm. Those are high 6 to 7 digit accounts where budgets are tight for transportation companies, and so they shop their business. And if they found a cheaper quote sometimes they would move their policy. So they had some cancellations. That's been a bigger factor for us this year.

But I'd say we're constantly looking at risk selection because you can't address the severity entirement rate. And so we recognize that real key to our operations at loss control unit that's evaluating, is this a safe account? And are they doing the right things to do whatever they can to make the [indiscernible] and safe practices as possible. So that feedback loop there is the most important thing in our book.

No further questions at this time. [Operator Instructions] We have no further questions. So I'll hand the call back to the team for any closing comments.

Well, thank you all for your interest in our company and your questions today. At RLI, we have a strong balance sheet with very diversified product and investment portfolios. This offers security to our customers, flexibility and opportunity to our product managers and consistent profitability and growth and book value to our shareholders. It isn't easy being different and having the fortitude to do the right thing when the discipline escapes others, but we are different at RLI. We are owners, and we will continue to make the decisions that are in the long-term best interest of our customers and our shareholders that allow us agility to respond in challenging and opportunistic markets.

If our unique culture and vision resonates with you, we are a great home for owners who share our values. Being different is what we do best and being different as delivered again for all of our key stakeholders.

In close, I want to thank our employee owners for their hard work, again, delivering the differences that works. See you on this quarter.

Ladies and gentlemen, if you wish to access the replay for this call, you may do so on the RLI homepage at www.rlicorp.com. This concludes our conference for today. Thank you all for participating, and have a nice day. All parties may now disconnect.