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Avoid RLI Corp., Spike Your Portfolio With Top 3 Insurers

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RLI Corp. RLI has been witnessing downward revisions of late. The stock has seen the Zacks Consensus Estimate for 2018 earnings moving 2.2% south. For 2019 too, the consensus mark has been lowered 2.4%.  

Shares of RLI Corp. have also underperformed the industry in a year. The stock has gained 10.8%, lagging the industry’s 14.6% rally.

The stock carries a Zacks Rank #4 (Sell) with an unimpressive Growth Score of C. Back-tested results show that stocks with a favorable Growth Score of A or B combined with a solid Zacks Rank #1 (Strong Buy) or 2 (Buy), comfortably outperform other stocks.

RLI Corp. has been experiencing increasing expenses on higher losses and settlement expenses plus policy acquisition costs. Expenses escalated nearly 35% over the last five years. Rising expenses have also induced net margin contraction by 470 basis points.

Being a property and casualty insurer, the company is exposed to the vagaries of nature. Underwriting income plunged 64.7% in 2017. Combined ratio, a measure of underwriting profitability of insurance operations, deteriorated 1190 basis points over the last couple of years.

Return on equity (ROE) undermines a company’s growth potential, measuring how efficiently the company uses its shareholder funds. RLI Corp.’s ROE has contracted 480 basis points over the last four years.

Valuations for RLI Corp. shares remains stretched. The company’s price-to-book ratio, the best multiple for valuing insurers, is pegged at 3.22, higher than the industry average of 1.41. Also, the company has an unimpressive Value Score of D.

Choosing the Stocks

While RLI Corp. doesn’t appear an attractive pick right now, there are a few solid stocks in the insurance space with a guarantee of greater returns. Also, these companies have outperformed the industry’s rally so far this year.

We have boiled down to three favorable stocks with potential to enhance one’s portfolio via the Zacks Stock Screener. Our search is refined by using a solid Zacks Rank, northbound estimate revisions, a favorable Value Score of A or B and strong growth projections. Stocks with a Value Score of A or B coupled with Buy-rated stocks are the best deals on offer.

Headquartered in New York, National General Holdings Corp. NGHC is a specialty personal lines insurance holding company, providing various insurance products and services in the United State. The company has a Zacks Rank #2 with a Value Score of B. The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 3.8% upward and for 2019, moved  3.4% north, over the last 30 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for 2018 and 2019 reflects a year-over-year improvement of 100.9% and 16.3%, respectively.

Shares of National General have gained 5.4% in a year, underperforming the industry.



Headquartered in Carmel, IN, CNO Financial Group. Inc. CNO develops, markets and administers health insurance, annuity, individual life insurance and other insurance products for senior and middle-income markets in the United States. The company carries a Zacks Rank of 2 with a Value Score of A. The stock has been witnessing upward estimate revisions — up 5.5% for 2018 and 0.9% for 2019 — over the last 30 days.

The Zacks Consensus Estimate for 2018 and 2019 denotes a year-over-year rise of 0.5% and 9%, respectively.

Shares of CNO Financial have gained 8.7% year to date, outpacing the industry’s average of 4.6%.



London, the United Kingdom-based Prudential Public Limited Company PUK provides a range of retail financial products and services, and asset management services to individuals and businesses primarily in Asia, the United States and the United Kingdom. The company is Zacks #2 Ranked with a Value Score of B. The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 1.7% upward and for 2019, moved 3.1% north over the last 30 days.

The Zacks Consensus Estimate for 2018 and 2019 indicates a year-over-year increase of 16% and 9.1%, respectively.

Shares of Prudential Public Limited have rallied 21.8% in a year, outperforming its industry.



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Prudential Public Limited Company (PUK) : Free Stock Analysis Report
 
CNO Financial Group, Inc. (CNO) : Free Stock Analysis Report
 
RLI Corp. (RLI) : Free Stock Analysis Report
 
National General Holdings Corp (NGHC) : Free Stock Analysis Report
 
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