RLI (NYSE:RLI) Surprises With Q2 Sales

Specialty insurance provider RLI (NYSE:RLI) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 20% year on year to $499.8 million. Its non-GAAP profit of $0.84 per share was 7.3% above analysts’ consensus estimates.

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“RLI delivered solid earnings and continued book value growth in the second quarter,” said RLI Corp. President & CEO Craig Kliethermes. “We posted an 85 combined ratio, underscoring our underwriting discipline in a highly competitive market. Investment income increased as we put operating cash flow to work in a favorable interest rate environment. Collectively, these results contributed to a 16% increase in book value since year-end 2024. These achievements reflect the strength of our team and their commitment to driving sustained value and long-term profitable growth.”

Company Overview

Founded in 1965 and named after its original focus on "replacement lens insurance" for contact lens wearers, RLI (NYSE:RLI) is a specialty insurance company that underwrites property, casualty, and surety products through wholesale brokers, independent agents, and carrier partnerships.

Revenue Growth

Insurers earn revenue three ways. The core insurance business itself, often called underwriting and represented in the income statement as premiums earned, is one way. Investment income from investing the “float” (premiums collected upfront not yet paid out as claims) in assets such as fixed-income assets and equities is the second way. Fees from various sources such as policy administration, annuities, or other value-added services is the third.

Thankfully, RLI’s 14.6% annualized revenue growth over the last five years was exceptional. Its growth beat the average insurance company and shows its offerings resonate with customers, a helpful starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. RLI’s annualized revenue growth of 10.3% over the last two years is below its five-year trend, but we still think the results suggest healthy demand. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, RLI reported robust year-on-year revenue growth of 20%, and its $499.8 million of revenue topped Wall Street estimates by 11.7%.

Net premiums earned made up 81.1% of the company’s total revenue during the last five years, meaning RLI barely relies on non-insurance activities to drive its overall growth.

Our experience and research show the market cares primarily about an insurer’s net premiums earned growth as investment and fee income are considered more susceptible to market volatility and economic cycles.

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Book Value Per Share (BVPS)

Insurance companies are balance sheet businesses, collecting premiums upfront and paying out claims over time. The float – premiums collected but not yet paid out – are invested, creating an asset base supported by a liability structure. Book value captures this dynamic by measuring:

• Assets (investment portfolio, cash, reinsurance recoverables) - liabilities (claim reserves, debt, future policy benefits)

BVPS is essentially the residual value for shareholders.

We therefore consider BVPS very important to track for insurers and a metric that sheds light on business quality. While other (and more commonly known) per-share metrics like EPS can sometimes be lumpy due to reserve releases or one-time items and can be managed or skewed while still following accounting rules, BVPS reflects long-term capital growth and is harder to manipulate.

RLI’s BVPS grew at a solid 10.1% annual clip over the last five years. BVPS growth has also accelerated recently, growing by 12.9% annually over the last two years from $14.82 to $18.89 per share.

Key Takeaways from RLI’s Q2 Results

It was encouraging to see RLI beat analysts’ EPS and combined ratio expectations this quarter. On the other hand, its revenue, net premiums earned, and book value per share fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 1.1% to $72.84 immediately following the results.

Is RLI an attractive investment opportunity right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.