On Dec 22, 2015, we issued an updated research report on RLI Corp. RLI.
RLI Corp., one of the industry’s leading property and casualty (P&C) underwriters, owes its superior profitability to a strong local branch office network, wide range of products and specialty insurance line of business. The company plans to expand its business by introducing a new product line in professional liability.
RLI Corp. primarily caters to niche markets through its main operating subsidiary – RLI Insurance Company. By leveraging its expertise in niche markets, the company has gained a competitive edge as well as strengthened its equilibrium with improving cash and investment balance. The insurer has also been able to lower debt.
A strong capital structure has enabled the company to meet its policyholders’ interests, enhance operations in the insurance sector and aid growth in its book value for the long term.
RLI Corp. has been successfully enhancing its shareholder value by regularly increasing and paying dividends for 157 consecutive quarters. In the last five years the company has returned more than $693 million to its shareholders. Additionally, last month the Board of Directors of RLI Corp. approved a special dividend of $2.00 per share
Factors weighing on the positives
Being a P&C insurer, the company remains exposed to catastrophic losses as natural disasters are unpredictable and affect results. Also, a low interest rate environment and increasing expenses have been weighing heavily on net investment income and margin expansion, respectively.
Looking at the quarterly results, RLI Corp.’s third-quarter 2015 operating net earnings beat the Zacks Consensus Estimate and also improved 2.9% year over year. The company owes its positive third-quarter performance to a marginally improved top line coupled with lower expenses. Going by the surprise trend, this Zacks Rank #1 (Strong Buy) P&C underwriter delivered positive surprises in three of the last four quarters, with an average of 18.13%.
Stocks to Consider
Investors interested in the P&C insurers can look at Cincinnati Financial Corporation CINF, Hallmark Financial HALL and Aspen Insurance Holdings AHL. Each of these stocks have the same Zacks Rank as RLI Corp.
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