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Here's Why Hold Strategy is Appropriate for RLI Stock Now

RLI Corp. RLI has been in investors' good books on the back of compelling product portfolio, rate increases, improved retention, higher premium receipts and sufficient liquidity.

Growth Projections

The Zacks Consensus Estimate for RLI’s 2024 earnings is pegged at $5.45 per share, indicating a 21.1% increase from the year-ago reported figure on 12.5% higher revenues of $1.63 billion.

Estimate Revision

The Zacks Consensus Estimate for 2024 has moved 1.5% north in the past 30 days. This should instill investors' confidence in the stock.

Earnings Surprise History

RLI has a decent earnings surprise history. It beat estimates in six of the last seven quarters and missed once.

Zacks Rank & Price Performance

The company currently carries a Zacks Rank #3 (Hold). In the past year, the stock has gained 24.7% compared with the industry’s rise of 24.9%.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Business Tailwinds

Premium, the main source of RLI’s revenues, is expected to gain from solid performance in the Property and Surety segments.

Product diversification across the Casualty, Property and Surety segments of the company has fueled the insurer’s growth and financial success. The Casualty segment continues to gain from an expanded distribution base in personal umbrella and rate increases.

The commercial property business has been gaining from higher wind and earthquake exposure rates. Rate increases, improved retention and new opportunities in the inland marine space should benefit marine products.

The Surety segment continues to benefit from its compelling product portfolio, growth within existing accounts and writing of bonds with new customers. Building materials inflation and new accounts will aid commercial and contract surety businesses in the future. RLI boasts solid operating results and its financial position remained strong. Operating cash flows should gain from higher premium receipts.

RLI will keep investing in customer relationships, technology and people to grow underwriting profits in the future.

The company has been paying dividends for 187 consecutive quarters and increased regular dividends in each of the last 48 years. Its dividend yield is currently 0.7%, which is higher than the industry’s average of 0.3%. Over the last 10 years, the insurer has returned $1.37 billion to shareholders and the quarterly dividend has grown an average of 5% per year.

Stocks to Consider

Some better-ranked stocks from the property and casualty insurance industry are Arch Capital Group Ltd. ACGL, Axis Capital Holdings Limited AXS and Cincinnati Financial Corporation CINF. While Arch Capital and Axis Capital sport a Zacks Rank #1 (Strong Buy) each, Cincinnati Financial carries Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Arch Capital has a decent history of delivering earnings surprises in the last four quarters, the average being 26.83%. In the past year, ACGL has gained 66.4%.

The Zacks Consensus Estimate for ACGL’s 2023 and 2024 earnings has moved 7.6% and 6.5% north, respectively, in the past 60 days, reflecting analysts’ optimism.

Axis Capital has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 9.75%. In the past year, AXS has gained 5.1%.

The Zacks Consensus Estimate for AXS’ 2023 and 2024 earnings per share is pegged at $8.41 and $9.31, indicating a year-over-year increase of 44.7% and 10.7%, respectively.

Cincinnati Financial has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 25.25%. In the past year, CINF has gained 8.1%.

The Zacks Consensus Estimate for CINF’s 2023 and 2024 earnings per share is pegged at $5 and $5.88, indicating a year-over-year increase of 17.9% and 17.6%, respectively.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

RLI Corp. (RLI) : Free Stock Analysis Report

Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report

Axis Capital Holdings Limited (AXS) : Free Stock Analysis Report

Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report

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