On May 9, 2014, we issued an updated research report on RLI Corp. (RLI).
Improved top line courtesy of higher premiums and investment income helped RLI Corp. outperform the Zacks Consensus Estimate on earnings by 5.6% and year-ago quarter’s earnings by 9.6%. With this, RLI Corporation delivered four straight quarters of positive surprises.
RLI Corp. is one of the most profitable property and casualty writers, having generated underwriting profits in 34 of the last 38 years, and consecutively in the last 18 years. A strong local branch office network, broad range of product offerings, and focus on specialty insurance lines also serve as contributors to the company’s profitability.
RLI Corp. remains committed to enhance its shareholders’ value. With the recent hike of 5.9% in quarterly dividend, RLI Corp. has hiked dividends over the past 39 years. Over the last 5 years, the company has returned more than $600 million to shareholders in the form of share buybacks and dividends. The company has $87.5 million remaining under its authorization.
However, the company has been experiencing increasing expenses. Due to higher debt levels, cost of debt is also increasing. Also, exposure to catastrophe events always remains a headwind for property and casualty insurers. In addition, given the soft interest rate environment, we do not expect much turnaround in net investment income.
With respect to estimate revisions, this Zacks Rank #3 (Hold) stock has witnessed a positive movement as most of the estimates were revised higher. For 2014, the Zacks Consensus Estimate moved north by 2.1% to $2.41 per share and for 2015, the same moved up 1.3% to $2.37 over the last 30 days.
Other Stocks to Consider
Some other stocks worth mentioning in the property and casualty insurance industry are Allied World Assurance Company Holdings, AG (AWH), AmTrust Financial Services, Inc. (AFSI) and Aspen Insurance Holdings Ltd. (AHL). All these stocks sport a Zacks Rank #1 (Strong Buy).