Here's Why You Should Retain RLI Stock in Your Portfolio
RLI Corp. RLI has been favored by investors on the back of improved interest rate environment, compelling product portfolio, rate increases, sufficient liquidity and effective capital deployment.
Growth Projections
The Zacks Consensus Estimate for RLI’s 2023 earnings is pegged at $5.08 per share, indicating an 8.3% increase from the year-ago reported figure on 17.4% higher revenues of $1.44 billion. The consensus estimate for 2024 earnings is pegged at $5.37 per share, indicating a 5.8% increase from the year-ago reported figure on 11.1% higher revenues of $1.61 billion.
Estimate Revision
The Zacks Consensus Estimate for 2023 and 2024 has moved 0.3% and 2.3% north, respectively, 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 three of the last four quarters and missed in one, the average being 31.14%.
Zacks Rank & Price Performance
The company currently carries a Zacks Rank #3 (Hold). In the past year, the stock has gained 10.8% compared with the industry’s rise of 14.5%.
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Return on Equity
RLI has been effectively improving its return on equity, which was 53.1% in the first half of 2023 versus -6.1% in the year-ago quarter. This reflects the insurer’s efficiency in utilizing shareholders’ fund.
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.
A high-interest rate environment should continue benefiting the company’s net investment income metric in the future. It rose 51% year over year in the first quarter.
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. In May 2023, RLI increased its dividend by 3.8%. 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. RLI has $87.5 million of remaining capacity from the repurchase program.
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 Kinsale Capital Group, Inc. KNSL, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arch Capital has a solid track record of beating earnings estimates in each of the last trailing four quarters, the average being 26.83%. In the past year, ACGL has gained 60.9%.
The Zacks Consensus Estimate for ACGL’s 2023 and 2024 earnings per share is pegged at $6.58 and $7.25, indicating a year-over-year increase of 35.1% and 10.2%, respectively.
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 0.3%.
The Zacks Consensus Estimate for AXS’ 2023 and 2024 earnings per share is pegged at $8.18 and $9.17, indicating a year-over-year increase of 40.7% and 12.1%, respectively.
Kinsale Capital beat estimates in each of the last four quarters, the average being 14.88%. In the past year, KNSL has gained 37.3%.
The Zacks Consensus Estimate for 2023 and 2024 has moved 3.3% and 3.1% north, respectively, in the past seven days, reflecting analysts’ optimism.
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RLI Corp. (RLI) : Free Stock Analysis Report
Axis Capital Holdings Limited (AXS) : Free Stock Analysis Report
Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report
Kinsale Capital Group, Inc. (KNSL) : Free Stock Analysis Report
