RLI CORP

Previous wording

assumptions are subject to various risks, uncertainties and other factors, including, without limitation those set forth in “Item 1A. Risk Factors” within the Annual Report on Form 10-K for the year ended December 31, 2025 and Part II within this report. Actual results could differ materially from those expressed in, or implied by, these forward looking statements. Forward looking statements reflect the Company’s expectations, plans or forecasts of future events and views as of the date of this report. While the Company may elect to update these forward looking statements at some point in the future, the Company specifically disclaims any obligation to do so. You should review the various risks, uncertainties and other factors listed from time to time in our Securities and Exchange Commission filings.

Current wording

Forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 appear throughout this report. These forward-looking statements generally include words such as “expect,” “predict,” “estimate,” “will,” “should,” “anticipate,” “believe” and similar expressions. Such assumptions are, in turn, based on information available and internal estimates and analyses of general economic conditions, competitive factors, conditions specific to the property and casualty insurance, reinsurance and surety industries, claims development and the impact thereof on our loss reserves, the adequacy and financial security of our reinsurance programs, developments in the securities market and the impact on our investment portfolio, regulatory changes and conditions and other factors. These assumptions are subject to various risks, uncertainties and other factors, including, without limitation those set forth in “Item 1A. Risk Factors” within the Annual Report on Form 10-K for the year ended December 31, 2025 and Part II within this report. Actual results could differ materially from those expressed in, or implied by, these forward-looking statements. Forward-looking statements reflect the Company’s expectations, plans or forecasts of future events and views as of the date of this report. While the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so. You should review the various risks, uncertainties and other factors listed from time to time in our Securities and Exchange Commission filings.

Previous wording

The casualty portion of our business consists largely of commercial excess, personal umbrella, general liability, transportation and management liability coverages, as well as package business and other specialty coverages, such as professional liability and workers’ compensation for office-based professionals. We also assume a limited amount of risks through quota share and excess of loss reinsurance agreements. The casualty business is subject to the risk of estimating losses and related loss reserves because the ultimate settlement of a casualty claim may take several years to fully develop.

Current wording

The casualty portion of our business consists largely of commercial excess, personal umbrella, general liability, transportation and management liability coverages, as well as package business and other specialty coverages, such as professional liability and workers’ compensation for office-based professionals. We also assume a limited amount of risks

Previous wording

The insurance marketplace is competitive across all of our segments. However, we believe that our business model is built to create underwriting income by focusing on sound risk selection and discipline. Our primary focus will continue to be

Current wording

The insurance marketplace is competitive across all of our segments. However, we believe that our business model is built to create underwriting income by focusing on sound risk selection and discipline. Our primary focus will continue to be on underwriting profitability, with a secondary focus on premium growth where we believe underwriting profit exists, as opposed to general premium growth or market share measurements.

Previous wording

Underwriting income was $58 million on an 86.0 combined ratio for the first three months of 2026, compared to $71 million on an 82.3 combined ratio in the same period of 2025. Underwriting results for 2026 were impacted by $16 million of pretax catastrophe losses, compared to $12 million in 2025. Results for each period benefited from favorable development on prior years’ loss reserves, which provided additional pretax earnings of $35 million in the first three months of 2026, compared to $31 million in 2025.

Current wording

Underwriting income was $118 million on an 85.8 combined ratio for the first six months of 2026, compared to $133 million on an 83.4 combined ratio in the same period of 2025. Underwriting results were impacted by $26 million of pretax catastrophe losses in both 2026 and 2025. Results for each period benefited from favorable development on prior years’ loss reserves, which provided additional pretax earnings of $75 million in the first six months of 2026, compared to $59 million in 2025.

Previous wording

The loss ratio was 47.0 for the first three months of 2026, compared to 44.5 in 2025. The benefit of higher levels of favorable development on prior years’ loss reserves was offset by higher catastrophe losses and a shift in the mix of business towards casualty lines, which tend to have higher non-catastrophe loss ratios than our property and surety products. The expense ratio increased to 39.0 from 37.8. Increased expenses were primarily related to continued investments in people and technology.

Current wording

The loss ratio was 46.2 for the first six months of 2026, compared to 45.2 in 2025. The benefit of greater favorable development on prior years’ loss reserves was offset by a shift in the mix of business towards casualty lines, which tend to have higher non-catastrophe loss ratios than our property and surety products. The expense ratio increased to 39.6 from 38.2. The increase primarily reflected continued investments in our workforce.

Previous wording

Equity in earnings of unconsolidated investees relates to our investment in Prime Holdings Insurance Services, Inc. (Prime), a specialty insurance company. We recognized $2 million of investee earnings from Prime in the first three months of 2026, compared to $3 million in 2025.

Current wording

Equity in earnings of unconsolidated investees relates to our investment in Prime Holdings Insurance Services, Inc. (Prime), a specialty insurance company. We recognized $5 million of investee earnings from Prime in the first six months of 2026, the same as in the first six months of 2025.

Previous wording

Net earnings for the first three months of 2026 totaled $55 million, compared to $63 million for the same period in 2025. The decrease was due to lower levels of underwriting income, partially offset by higher investment income.

Current wording

Net earnings for the first six months of 2026 totaled $223 million, compared to $188 million for the same period in 2025. The increase primarily reflected larger unrealized gains on equity securities and higher investment income.

Previous wording

Comprehensive earnings totaled $30 million for the first three months of 2026, compared to $93 million for the first three months of 2025. Other comprehensive earnings (loss) primarily included net after-tax unrealized gains (losses) from the fixed income portfolio. Other comprehensive loss of $25 million in the first three months of 2026 was primarily attributable to rising interest rates, which decreased the fair value of securities held in the fixed income portfolio. Comparatively, $30 million of other comprehensive earnings was recognized in 2025.

Current wording

Comprehensive earnings totaled $195 million for the first six months of 2026, compared to $236 million for the first six months of 2025. Other comprehensive earnings (loss) primarily included net after-tax unrealized gains (losses) from the fixed income portfolio. Other comprehensive loss of $28 million in the first six months of 2026 was primarily attributable to rising interest rates, which decreased the fair value of securities held in the fixed income portfolio. Comparatively, $49 million of other comprehensive earnings was recognized in 2025.

Previous wording

Gross premiums written increased $13 million for the first three months of 2026, driven by growth within our casualty segment and reflecting favorable rate movement. Net premiums earned increased $13 million, also driven by our casualty segment and consistent with the growth in gross premiums written.

Current wording

Gross premiums written increased $30 million for the first six months of 2026, driven by favorable rate movement and growth within our casualty segment. Net premiums earned increased $28 million, primarily due to continued growth within our casualty segment.

Previous wording

Gross premiums written for the casualty segment increased $29 million in the first three months of 2026. We continued to benefit from positive rate movement across a large portion of our casualty segment. Personal umbrella continued expansion of its distribution base, while our commercial transportation business benefited from some other carriers reducing their appetite. The decline in general liability premium was the result of slower construction activity within our targeted market for the year, which created a challenging environment to write business on new projects. Other casualty premium declined due to increased competition in our binding authority group and our decision to no longer participate in the reinsurance agreement with Prime.

Current wording

Gross premiums written for the casualty segment increased $61 million in the first six months of 2026. We continued to benefit from positive rate movement across a large portion of our casualty segment. Personal umbrella expanded its distribution base while achieving favorable rate increases. Our commercial transportation business benefited from favorable market conditions as some competitors reduced their appetite, creating opportunities to write additional high-quality business at adequate rates. The decline in general liability premiums resulted from slower construction activity within our targeted markets, which created a more challenging environment for writing new project business. Other casualty premiums declined due to increased competition in our binding authority business and our decision to no longer participate in the reinsurance agreement with Prime.

Previous wording

Gross premiums written for the property segment decreased $15 million in the first three months of 2026. Commercial property declined $18 million as more intense competition drove down rates. However, new product adjacencies led to $2 million of premium growth for our marine product. Additionally, growth in other property premiums was driven by rate increases and ongoing efforts to enhance client experience to attract and retain business for our Hawaii homeowners coverages.

Current wording

Gross premiums written for the property segment decreased $28 million in the first six months of 2026. Commercial property declined $36 million as increased market capacity and competition continued to pressure pricing. Marine premiums increased $5 million, driven by strong new business production and continued growth in our inland marine products. Additionally, growth in other property premiums was driven by rate increases for our Hawaii homeowners business and new business opportunities.

Previous wording

The casualty segment recorded underwriting income of $7 million in the first three months of 2026, compared to $2 million for the same period last year. Prior accident years’ reserve releases reduced loss and settlement expenses for the casualty segment by $14 million in 2026, primarily related to accident years 2018, 2019, 2021, 2022 and 2025. Larger drivers of the favorable development were executive products, professional services and commercial transportation, while personal umbrella experienced some adverse development. In comparison, $5 million of prior accident years’ reserves were released in the first three months of 2025. Commercial excess, general liability and subsegments within professional liability drove the favorable development, while commercial transportation and personal umbrella had adverse development related to auto exposures in 2025. Storm losses on casualty-oriented package policies that include property coverage resulted in $2 million of losses in 2026 and less than $1 million in 2025.

Current wording

The casualty segment recorded underwriting income of $9 million in the first six months of 2026, compared to $10 million for the same period last year. Prior accident years’ reserve releases reduced loss and settlement expenses for the casualty segment by $28 million in 2026, primarily related to accident years 2019 through 2022, as well as 2024 and 2025. Larger drivers of the favorable development were commercial transportation, executive products, professional services and commercial excess, while personal umbrella experienced some adverse development. In comparison, $20 million of prior accident years’ reserves were released in the first six months of 2025. Commercial excess, general liability and subsegments within professional liability drove the favorable development, while commercial transportation and personal umbrella had adverse development related to auto exposures in 2025. Storm losses on casualty-oriented package policies that include property coverage resulted in $2 million of losses in both 2026 and 2025.

Previous wording

The property segment recorded underwriting income of $48 million for the first three months of 2026, compared to $57 million for the same period last year. Underwriting results for 2026 included $21 million of favorable development on prior years’ loss and catastrophe reserves, offset by $14 million of storm losses. Comparatively, results for 2025 included $18 million of favorable development on prior years’ loss and catastrophe reserves and $12 million of storm and other catastrophe losses.

Current wording

The property segment recorded underwriting income of $102 million for the first six months of 2026, compared to $106 million for the same period last year. Underwriting results for 2026 included $44 million of favorable development on prior years’ loss and catastrophe reserves, offset by $24 million of storm losses. Comparatively, results for 2025 included $28 million of favorable development on prior years’ loss and catastrophe reserves and $24 million of storm and other catastrophe losses.

Previous wording

The surety segment recorded underwriting income of $2 million for the first three months of 2026, compared to $12 million for the same period last year. Results for 2026 included favorable development on prior accident years’ reserves, which decreased loss and settlement expenses for the segment by less than $1 million, compared to $8 million in 2025.

Current wording

The surety segment recorded underwriting income of $7 million for the first six months of 2026, compared to $16 million for the same period last year. Results for 2026 included favorable development on prior accident years’ reserves, which decreased loss and settlement expenses for the segment by $4 million, compared to $11 million in 2025.

Previous wording

The combined ratio for the surety segment totaled 93.7 for the first three months of 2026, compared to 68.5 for the same period last year. The segment’s loss ratio was 18.0 in 2026, up from (3.6) in 2025, due to lower levels of favorable prior accident years’ reserve development. The expense ratio was 75.7, up from 72.1 in the prior year, due to continued investments in people and technology, as well as higher acquisition expenses, which can fluctuate between periods.

Current wording

The combined ratio for the surety segment totaled 90.4 for the first six months of 2026, compared to 78.2 for the same period last year. The segment’s loss ratio was 13.8 in 2026, up from 4.8 in 2025, due to lower levels of favorable prior accident years’ reserve development. The expense ratio was 76.6, up from 73.4 in the prior year, due to continued investments in people, as well as higher acquisition expenses, which can fluctuate between periods.

Previous wording

Our investment portfolio generated net investment income of $42 million during the first three months of 2026, an increase of 15 percent from the same period in 2025. The increase in investment income was due to higher reinvestment rates, as well as an increased average asset base relative to the prior year.

Current wording

Our investment portfolio generated net investment income of $88 million during the first six months of 2026, an increase of 16 percent from the same period in 2025. The increase in investment income was due to higher reinvestment rates, as well as an increased average asset base relative to the prior year.

Previous wording

Yields on our fixed income investments for the first three months of 2026 and 2025 were as follows:

Current wording

Yields on our fixed income investments for the first six months of 2026 and 2025 were as follows:

Previous wording

The fixed income portfolio decreased by $5 million in the first three months of 2026, as interest rates increased causing the fair value of bonds to decline. Average fixed income duration was 4.7 years at March 31, 2026, reflecting our liability structure and sound capital position. The equity portfolio decreased by $34 million during the first three months of 2026, due to negative performance in the equity markets. Proceeds from debt issuance were invested into short-term securities, increasing the short-term investment portfolio by $266 million.

Current wording

The fixed income portfolio increased by $85 million in the first six months of 2026, as the majority of investment cash flows were directed to the fixed income portfolio. Average fixed income duration was 4.7 years at June 30, 2026, reflecting our liability structure and sound capital position. The equity portfolio increased by $61 million during the first six months of 2026, due to positive performance in the equity markets, primarily in the second quarter. Proceeds from debt issuance were invested into short-term securities, increasing the short-term investment portfolio by $86 million.

Previous wording

Our effective tax rate for the first three months of 2026 was 18.5 percent, compared to 19.6 percent for the same period in 2025. Effective rates are dependent upon components of pretax earnings or losses and the related tax effects. The decrease in the effective tax rate for the three-month period in 2026 was primarily due to higher levels of tax credit utilization.

Current wording

Our effective tax rate for the first six months of 2026 was 19.8 percent, compared to 20.2 percent for the same period in 2025. Effective rates are dependent upon components of pretax earnings or losses and the related tax effects. The decrease in the effective tax rate for the six-month period in 2026 was primarily due to higher levels of tax credit utilization and deductions related to the $2.00 special dividend paid to our Employee Stock Ownership Plan.

Previous wording

Net premiums earned increased 3 percent, driven primarily by products in our casualty segment. Investment income was up 15 percent, reflecting an increased average asset base and higher reinvestment rates. Market declines resulted in $39 million of unrealized losses on equity securities in the first three months of 2026, compared to $42 million of unrealized losses for the same period in 2025. Realized gains in 2026 included $10 million of realized gains on equity securities, primarily due to rebalancing within our equity strategies, and less than $1 million of realized losses on fixed income securities. This compares to $15 million of realized gains on equity securities and less than $1 million of realized losses on fixed income securities during the first three months of 2025.

Current wording

Net premiums earned increased 4 percent, driven primarily by products in our casualty segment. Investment income was up 17 percent, reflecting higher reinvestment rates and an increased average asset base. Market increases resulted in $103 million of unrealized gains on equity securities in the second quarter of 2026, compared to $44 million of unrealized gains for the same period in 2025. Realized gains in 2026 included $10 million of realized gains on equity securities, primarily due to rebalancing within our equity strategies, and less than $1 million of realized losses on fixed income securities. This compares to $14 million of realized gains on equity securities, $1 million of realized losses on fixed income securities and $2 million of other realized gains during the second quarter of 2025.

Previous wording

The combined ratio for the casualty segment was 97.1 in 2026, compared to 99.1 in 2025. The segment’s loss ratio was 61.5 in 2026, down from 63.7 in 2025, primarily due to higher levels of favorable prior accident years’ reserve development. The expense ratio for the casualty segment was 35.6, up from 35.4 for the same period last year.

Current wording

The combined ratio for the casualty segment was 99.3 in 2026, compared to 96.5 in 2025. The segment’s loss ratio was 62.2 in 2026, up from 60.2 in 2025, primarily due to lower levels of favorable prior accident years’ reserve development. The expense ratio for the casualty segment was 37.1, up from 36.3 for the same period last year.

Previous wording

Underwriting results for the first three months of 2026 resulted in a combined ratio of 61.9, compared to 57.1 for the same period last year. The segment’s loss ratio was 26.8 in 2026, up from 24.7 in 2025, as larger catastrophe losses and slightly higher attritional, non-catastrophe losses on a lower earned premium base were partially offset by increased favorable development on prior accident years. The segment’s expense ratio increased to 35.1 in 2026 from 32.4 in the prior year, as a result of continued investments in people and technology on a lower earned premium base.

Current wording

Underwriting results for the second quarter of 2026 resulted in a combined ratio of 56.8, compared to 62.1 for the same period last year. The segment’s loss ratio was 21.6 in 2026, down from 29.4 in 2025, due to larger reserve releases and lower catastrophe losses. The segment’s expense ratio increased to 35.2 in 2026 from 32.7 in the prior year, as a result of continued investments in people on a lower earned premium base.

Previous wording

The following table summarizes cash flows provided by (used in) our activities for the three-month periods ended March 31, 2026 and 2025:

Current wording

The following table summarizes cash flows provided by (used in) our activities for the six-month periods ended June 30, 2026 and 2025:

Previous wording

Premiums received from customers are our largest source of cash, while claim payments on insured losses represent our largest use of cash. Cash flows from operating activities may vary between periods due to the timing of these receipts and payments. Operating cash flows decreased in the first three months of 2026 compared to the same period in 2025, primarily due to higher loss and settlement expense payments, the purchase of tax credits applied against federal income taxes incurred in 2025, and higher bonus and profit-sharing contributions paid in the current period. The increase in incentive compensation reflects improved financial performance in 2025. These decreases were partially offset by higher gross premium and investment income receipts, as well as lower reinsurance costs.

Current wording

Premiums received from customers are our largest source of cash, while claim payments on insured losses represent our largest use of cash. Cash flows from operating activities may vary between periods due to the timing of these receipts and payments. Operating cash flow decreased in the first six months of 2026 compared to the same period in 2025, primarily due to higher loss and settlement expense payments, the purchase of federal income tax credits, and higher employee compensation payments. These decreases were partially offset by higher investment income receipts and lower reinsurance costs. During 2026, our financing activities included returning $184 million to shareholders through a $2.00 special dividend and repurchasing $12 million of common stock under the $250 million share repurchase plan the Company’s Board of Directors authorized on May 14, 2026.

Previous wording

Outstanding debt totaled $347 million as of March 31, 2026, consisting of $297 million of long-term debt, net of unamortized discount and debt issuance costs, and $50 million of short-term debt. On March 3, 2026, we completed a public debt offering, issuing $300 million of senior notes maturing June 1, 2036, with interest payable semi-annually at a rate of 5.375 percent. The notes were issued at a discount, resulting in net proceeds of $297 million after deducting the discount and issuance costs.

Current wording

Outstanding debt totaled $297 million as of June 30, 2026. On March 3, 2026, we completed a public debt offering, issuing $300 million of senior notes maturing June 1, 2036, with interest payable semi-annually at a rate of 5.375 percent. The notes were issued at a discount, resulting in net proceeds of $297 million after discounts and issuance costs.

Previous wording

We repaid $50 million that was outstanding under our revolving credit facility with PNC Bank, N.A. (PNC) on February 20, 2026, which had been drawn in 2023. The credit facility with PNC, which was entered into during the first quarter of 2023, provided borrowing capacity of $100 million and was scheduled to expire on May 29, 2026. On February 26, 2026, we entered into an amended and restated credit agreement with PNC to extend the maturity date to February 26, 2031. The amended agreement provides borrowing capacity of $150 million and may be increased to $200 million under certain conditions.

Current wording

We repaid $50 million that was outstanding under our revolving credit facility with PNC Bank, N.A. (PNC) on February 20, 2026. The credit facility with PNC, which was entered into during the first quarter of 2023, provided borrowing capacity of $100 million and was scheduled to expire on May 29, 2026. On February 26, 2026, we entered into an amended and restated credit agreement with PNC to extend the maturity date to February 26, 2031. The amended agreement provides borrowing capacity of $150 million and may be increased to $200 million under certain conditions.

Previous wording

RLI Insurance Company also borrowed $50 million from the Federal Home Loan Bank of Chicago (FHLBC) on November 12, 2025, which replaced the $50 million borrowed in 2024. The borrowing matures on November 12, 2026, but may be repaid early at set quarterly dates. Interest is paid monthly at an annualized rate of 4.21 percent.

Current wording

On May 12, 2026, we repaid the $50 million borrowed from the Federal Home Loan Bank of Chicago (FHLBC) on November 12, 2025. While the borrowing was outstanding, interest was paid monthly at an annualized rate of 4.21 percent.

Previous wording

Two of our insurance companies, RLI Insurance Company (RLI Ins.) and Mt. Hawley Insurance Company, are members of the FHLBC. Membership in the Federal Home Loan Bank system provides both companies access to an additional source of liquidity via a secured lending facility. Our membership allows each insurance subsidiary to determine tenor and structure at the time of borrowing. As of March 31, 2026, $52 million of investments were pledged as collateral with the FHLBC to ensure timely access to the secured lending facility.

Current wording

Two of our insurance companies, RLI Insurance Company (RLI Ins.) and Mt. Hawley Insurance Company, are members of the FHLBC. Membership in the Federal Home Loan Bank system provides both companies access to an additional source of liquidity via a secured lending facility. Our membership allows each insurance subsidiary to determine tenor and structure at the time of borrowing. As of June 30, 2026, there were no outstanding borrowings with the FHLBC.

Previous wording

As of March 31, 2026, we had cash and other investments maturing within one year of approximately $635 million and an additional $786 million maturing between one to five years. Whereas our strategy is to be fully invested at all times, short-term investments in excess of demand deposit balances are considered a component of investment activities, and thus are classified as investments in our consolidated balance sheets.

Current wording

As of June 30, 2026, we had cash and other investments maturing within one year of approximately $424 million and an additional $811 million maturing between one to five years. Whereas our strategy is to be fully invested at all times, short-term investments in excess of demand deposit balances are considered a component of investment activities, and thus are classified as investments in our consolidated balance sheets.

Previous wording

We maintain a diversified investment portfolio representing policyholder funds that have not yet been paid out as claims, as well as the capital we hold for our shareholders. Invested assets at March 31, 2026 have increased $226 million from December 31, 2025. As of March 31, 2026, our investment portfolio had the following asset allocation breakdown:

Current wording

We maintain a diversified investment portfolio representing policyholder funds that have not yet been paid out as claims, as well as the capital we hold for our shareholders. Invested assets at June 30, 2026 have increased $211 million from December 31, 2025. As of June 30, 2026, our investment portfolio had the following asset allocation breakdown:

Previous wording

As of March 31, 2026, our fixed income portfolio remained well diversified, with 1,931 individual issues.

Current wording

As of June 30, 2026, our fixed income portfolio remained well diversified, with 1,977 individual issues.

Previous wording

Our investment portfolio has limited exposure to structured asset-backed securities. As of March 31, 2026, we had $388 million in ABS, which are pools of assets collateralized by cash flows from several types of loans, including home equity, credit cards, autos and structured bank loans in the form of collateralized loan obligations (CLOs).

Current wording

Our investment portfolio has limited exposure to structured asset-backed securities. As of June 30, 2026, we had $420 million in ABS, which are pools of assets collateralized by cash flows from several types of loans, including home equity, credit cards, autos and structured bank loans in the form of collateralized loan obligations (CLOs).

Previous wording

As of March 31, 2026, we had $322 million in commercial and non-agency MBS and $601 million in MBS backed by government sponsored enterprises (GSEs - Freddie Mac, Fannie Mae and Ginnie Mae). Excluding the GSE-backed MBS, our exposure to ABS and CMBS was 14.5 percent of our investment portfolio at quarter end.

Current wording

As of June 30, 2026, we had $338 million in commercial and non-agency MBS and $594 million in MBS backed by government sponsored enterprises (GSEs - Freddie Mac, Fannie Mae and Ginnie Mae). Excluding the GSE-backed MBS, our exposure to ABS and CMBS was 15.5 percent of our investment portfolio at quarter end.

Previous wording

We had $1.5 billion in corporate fixed income securities as of March 31, 2026, which includes $140 million invested in a high-yield credit strategy. This high-yield portfolio consists of floating rate bank loans and bonds that are below investment grade in credit quality and offer incremental yield over our core fixed income portfolio.

Current wording

We had $1.6 billion in corporate fixed income securities as of June 30, 2026, which includes $143 million invested in a high-yield credit strategy. This high-yield portfolio consists of floating rate bank loans and bonds that are below investment grade in credit quality and offer incremental yield over our core fixed income portfolio.

Previous wording

The municipal portfolio includes approximately 73 percent taxable securities and 27 percent tax-exempt securities. Approximately 91 percent of our municipal bond portfolio maintains an ‘AA’ or better rating, while 100 percent of the municipal bond portfolio is rated ‘A’ or better.

Current wording

The municipal portfolio includes approximately 72 percent taxable securities and 28 percent tax-exempt securities. Approximately 91 percent of our municipal bond portfolio maintains an ‘AA’ or better rating, while 100 percent of the municipal bond portfolio is rated ‘A’ or better.

Previous wording

As of March 31, 2026, our equity portfolio had a dividend yield of 1.4 percent, compared to 1.1 percent for the S&P 500 index. Because of the corporate dividend-received-deduction applicable to our dividend income, we pay an effective tax rate of 13.1 percent on dividends, compared to 21.0 percent on taxable interest and 5.3 percent on municipal bond interest income. The equity portfolio is managed in a diversified and granular manner, with 77 individual securities and five ETF positions. No single company exposure in the equity portfolio represents more than 1 percent of invested assets.

Current wording

As of June 30, 2026, our equity portfolio had a dividend yield of 1.3 percent, compared to 1.1 percent for the S&P 500 index. Because of the corporate dividend-received-deduction applicable to our dividend income, we pay an effective tax rate of 13.1 percent on dividends, compared to 21.0 percent on taxable interest and 5.3 percent on municipal bond interest income. The equity portfolio is managed in a diversified and granular manner, with 75 individual securities and five ETF positions. No single company exposure in the equity portfolio represents more than 1 percent of invested assets.

Previous wording

We had $56 million of investments in unconsolidated investees at March 31, 2026, compared to $54 million at December 31, 2025.

Current wording

We had $58 million of investments in unconsolidated investees at June 30, 2026, compared to $54 million at December 31, 2025.

Previous wording

As of March 31, 2026, our capital structure consisted of $347 million in debt and $1.8 billion of shareholders’ equity. Debt outstanding comprised 16 percent of total capital as of March 31, 2026. Interest and fees on debt obligations totaled $2 million for the first three months of 2026 and $1 million during the same period in 2025. We incurred interest expense on debt at an average annual interest rate of 5.03 percent during the first three months of 2026, compared to 5.18 percent during the same period last year.

Current wording

As of June 30, 2026, our capital structure consisted of $297 million in debt and $1.8 billion of shareholders’ equity. Debt outstanding comprised 14 percent of total capital as of June 30, 2026. Interest and fees on debt obligations totaled $7 million for the first six months of 2026 and $3 million during the same period in 2025. We incurred interest expense on debt at an average annual interest rate of 5.20 percent during the first six months of 2026, compared to 5.18 percent during the same period last year.

Previous wording

We paid a regular quarterly cash dividend of $0.16 per share on March 16, 2026, the same amount as the prior quarter. We have increased dividends in each of the last 50 years.

Current wording

On June 12, 2026, we paid a special dividend of $2.00 per share and a regular quarterly cash dividend of $0.18 per share, a 12.5 percent increase over the prior quarter. We have increased dividends in each of the last 51 years.

Previous wording

Our three insurance companies are subsidiaries of RLI Corp, with RLI Ins. as the first-level, or principal, insurance company. At the holding company (RLI Corp.) level, we rely largely on dividends from our insurance subsidiaries to meet our obligations for paying principal and interest on outstanding debt, corporate expenses and dividends to RLI Corp. shareholders. As discussed further below, dividend payments to RLI Corp. from our principal insurance subsidiary are restricted by state insurance laws as to the amount that may be paid without prior approval of the insurance regulatory authorities of Illinois. As a result, we may not be able to receive dividends from such subsidiary at times and in amounts necessary to pay desired dividends to RLI Corp. shareholders. On a GAAP basis, as of March 31, 2026, our holding company had $1.8 billion in equity. This includes amounts related to the equity of our insurance subsidiaries, which is subject to regulatory restrictions under state insurance laws. The unrestricted portion of holding company net assets is comprised primarily of investments and cash, including $384 million in liquid assets. Unrestricted funds at the holding company are available to fund debt interest, general corporate obligations and dividend payments to our shareholders. If necessary, the holding company also has other potential sources of liquidity that could provide for additional funding to meet corporate obligations or pay shareholder dividends, which include a revolving line of credit, as well as access to capital markets.

Current wording

Our three insurance companies are subsidiaries of RLI Corp, with RLI Ins. as the first-level, or principal, insurance company. At the holding company (RLI Corp.) level, we rely largely on dividends from our insurance subsidiaries to meet our obligations for paying principal and interest on outstanding debt, corporate expenses and dividends to RLI Corp. shareholders. As discussed further below, dividend payments to RLI Corp. from our principal insurance subsidiary are restricted by state insurance laws as to the amount that may be paid without prior approval of the insurance regulatory authorities of Illinois. As a result, we may not be able to receive dividends from such subsidiary at times and in amounts necessary to pay desired dividends to RLI Corp. shareholders. On a GAAP basis, as of June 30, 2026, our holding company had $1.8 billion in equity. This includes amounts related to the equity of our insurance subsidiaries, which is subject to regulatory restrictions under state insurance laws. The unrestricted portion of holding company net assets is comprised primarily of investments and cash, including $191 million in liquid assets. Unrestricted funds at the holding company are available to fund debt interest, general corporate obligations and dividend payments to our shareholders. If necessary, the holding company also has other potential