Why RLI Corp (RLI) Remains a Top Specialty Insurance Stock

First Pacific Advisors recently released its Q2 2026 investor letter, highlighting RLI Corp. (NYSE:RLI) as a top specialty insurance stock. The fund's small-cap value portfolio returned 27.02% in the first half of 2026, outperforming the Russell 2000 Value Index and S&P 600 Index. RLI Corp., a specialty insurer offering property and casualty coverage, exhibited strong financial performance from 2015-2024, with a combined ratio of 89.3% and ROE of 16.6%.

The fund's bottom-up approach and focus on undervalued AI stocks led to the decision to add to its RLI position at roughly 20x earnings. Despite being on the list of 40 most popular stocks among hedge funds, the fund's conviction lies in the potential of other AI stocks for higher returns within a shorter time frame.