On Jun 2, 2015, we issued an updated research report on RLI Corp. RLI.
RLI Corp’s operating earnings in the first quarter missed the Zacks Consensus Estimate by a cent and declined year over year. A higher magnitude of expense increase weighed on the company’s earnings, resulting in a year-over-year decline. Though better premiums were a respite, lower investment results were a drag. Underwriting profit declined as well.
With respect to earnings performance, the Zacks Rank #3 (Hold) property and casualty insurer delivered positive surprises in three of the last four quarters, with an average beat of 7.43%.
Nonetheless, the earnings weakness did not deter the board of directors of RLI Corp. from recently approving a 5.5% dividend hike. The board hiked dividend in each of the last 40 years. The company has been on a dividend trail for a record 156 quarters consecutively.
RLI Corp. boasts being one of the industry’s most profitable P&C writers, having generated underwriting profits in 35 of the past 39 years, the last 19 years in particular.
RLI Corp. has always focused on expanding its business with new products that has diversified its portfolio. This in turn has been driving solid premiums for the company.
On the flip side, RLI Corp. has been experiencing increasing expenses. Also, the prevalent low interest rate environment is affecting the investment results.
Softer-than-expected results in the first quarter pushed the Zacks Consensus Estimate down by a couple of cents to $2.24 for 2015 and by a penny to $2.22 for 2016. These estimates translate into year-over-year decrease of 14.2% and 0.7% for 2015 and 2016, respectively.
Stocks to Consider
Some better-ranked property and casualty insurers are Endurance Specialty Holdings Ltd. ENH, Markel Corp. MKL and State Auto Financial Corp. STFC. All of these sport a Zacks Rank #1 (Strong Buy).
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