It has been about a month since the last earnings report for RLI Corp. (RLI). Shares have lost about 0.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is RLI Corp. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
RLI’s Q4 Earnings Surpass Estimates, Increase Y/Y
RLI Corp.’s fourth-quarter 2019 operating earnings of 63 cents per share beat the Zacks Consensus Estimate by 28.6%. The bottom line improved 57.5% from the prior-year quarter.
The quarter benefited from improved premiums from Casualty and Property segments, growth in net investment income and reduced expenses.
Operating revenues for the reported quarter totaled $233 million, missing the Zacks Consensus Estimate by 1.1%. The top line however increased 5.4% year over year. This upside can be attributed to higher net premiums earned (up 5.7% year over year) and net investment income (up 4.8%).
Gross premiums written increased 6% year over year to $273.8 million. This uptick was driven by higher contribution from Casualty and Property segments.
Total expenses decreased 0.2% year over year to nearly $204.7 million, primarily due to reduced loss and settlement expenses.
Net investment income rose 4.8% year over year to $17.8 million. Total return from the investment portfolio was 1.8% year over year.
The company reported underwriting income of $16.5 million, which increased 650% from the year-ago period. This upside was due to solid results at the Property, Casualty and Surety segments.
Combined ratio for the fourth quarter improved 650 basis points year over year to 92.4%.
The company exited the fourth quarter with total investments and cash of $2.6 billion, up 16.7% from 2018 end levels.
Book value was $22.18 per share as of Dec 31, 2019, up 22.3% from the figure as of Dec 31, 2018.
Long-term debt was $149.3 million, up 0.1% from 2018 end.
Statutory surplus improved 24.1% to $1029.7 million as of Dec 31, 2019 from $829.8 million as of Dec 31, 2018.
Return on equity was 27.8% for the twelve months ended Dec 31,2019, reflecting an increase of 2420 basis points.
Net cash flow from operations increased 67.8% year over year to $90.2 million in the quarter under review.
On Dec 20, 2019, the company paid out quarterly dividend of 23 cents per share and a special cash dividend of $1.00 per share. The company returned nearly $1.25 billion to shareholders in the last 10 years.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
At this time, RLI Corp. has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise RLI Corp. has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.