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RLI Corp. (RLI) Rises 15.3% in a Year: More Room to Run?

Shares of RLI Corp. RLI have gained 15.3% in a year against the industry's decline of 2.9%. The Zacks S&P 500 composite increased 17.1% in the said time frame. With a market capitalization of $4.6 billion, average volume of shares traded in the last three months was 0.1 million.



In the past 60 days, the company’s 2020 earnings estimates have moved 13.9% north, reflecting investors’ optimism.

It has a decent earnings surprise history too. Its earnings beat estimates in three of the last four quarters. RLI Corp has a trailing four-quarter earnings surprise of 152.52%, on average.

Will the Bull Run Continue?

RLI Corp is focused on pursuing multiple initiatives that are designed to boost value. It capitalizes on market opportunities in niche spaces and invests in technology to drive efficiency as well as leverage the platform.

The company achieved 24 straight years of a combined ratio below 100 and beaten the industry ratio by an average of 14 points over the last 10 years.

Over the 24-year period, the Zacks Rank #3 (Hold) insurer averaged an 88.3 combined ratio, which drives the ability to boost shareholders’ returns by way of underwriting income itself, net investment income from investment portfolio and long-term appreciation in equity portfolio.

The property and casualty’s revenue growth is likely to have benefitted from compelling product portfolio, new products and business expansion, sustained rate increase, expanded distribution and operational strength. The Zacks Consensus Estimate 2021 revenues is pegged at $ $993 million an increase of 6.5% from year-ago level.

RLI Corp has a distinguished track record of success. The company achieved its 45th straight year of dividend increase and recorded 5.1% growth rate in the last 10 years. In November, 2020, it declared a special cash dividend of $1.00 per share. The company has been paying out special dividends since 2011 and the latest approval marks the 11th straight special dividend. Since 2015, it has returned $525 million to shareholders.

Furthermore, return on equity (ROE), which reflects on a company’s efficient utilization of shareholders’ funds to generate earnings, has been increasing in the past several years. The company’s trailing 12-month ROE of 11.1% betters the industry average of 5.6%. RLI Corp averaged 12.4% return on equity in the past 10 years.

Operating cash flow was strong in the third quarter and drove a continued preference for purchase activity in high-quality investment-grade securities. It also maintains a revolving line of credit with Bank of Montreal, Chicago Branch, which facilitates it to borrow up to an aggregate principal amount of $60 million.

Despite all the tragedies associated to the COVID-19 pandemic, RLI Corp has persistently supported customers as well as delivered underwriting profit and double-digit book value growth to shareholders. Its product diversification boosted growth and financial success.

Stocks to Consider

Investors interested in property and casualty industry may also look at The Allstate Corporation ALL, Alleghany Corporation Y and American Financial Group, Inc. AFG. While The Allstate and Alleghany sport a Zacks Rank #1 (Strong Buy), American Financial carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Allstate surpassed estimates in each of the last four quarters. It has a trailing four-quarter  earnings surprise of 38.59%, on average.

Alleghany surpassed estimates in two of the last four quarters. It has a trailing four-quarter  earnings surprise of 34.08%, on average.

American Financial surpassed estimates in three of the last four quarters. It has a trailing four-quarter earnings surprise of 5.85%, on average.

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