A month has gone by since the last earnings report for RLI Corp. (RLI). Shares have lost about 4.9% 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 catalysts.
RLI Q2 Earnings & Revenues Miss Estimates, Premiums Rise Y/Y
RLI Corp. reported second-quarter 2023 operating earnings of $1.16 per share, missing the Zacks Consensus Estimate by 3.3%. The bottom line declined 22.1% from the prior-year quarter. The quarterly results suffered due to higher-than-expected losses from storms.
Operating revenues for the reported quarter were $351.1 million, up 16.5% year over year, driven by 14% higher net premiums earned and 55.8% higher net investment income. The top line however missed the Zacks Consensus Estimate by 2%.
Gross premiums written increased 21.3% year over year to $508 million. This uptick can be attributed to the solid performance of the Casualty (up 1.1%), Property (up 63.3%) and Surety segments (up 1.1%). Our estimate was $517.7 million.
Net investment income increased 56% year over year to $28.8 million. The Zacks Consensus Estimate for the metric was pegged at $27.6 million, while our estimate was $24.9 million. The investment portfolio’s total return was 1.1% in the quarter.
Total expenses increased 24.2% year over year to $287.3 million, primarily due to higher loss and settlement expenses, and higher policy acquisition costs, insurance operating expenses and general corporate expenses. Our estimate was $262.9 million.
Underwriting income of $41.2 million decreased 26.4%, primarily due to losses from storms. Combined ratio deteriorated 70 basis points (bps) year over year to 87.2. The Zacks Consensus Estimate for the metric was pegged at 85, while our estimate was 78.2.
RLI exited the quarter with total investments and cash of $3.6 billion, up 9.7% from 2022 end. Book value was $29.65 per share as of Jun 30, 2023, up 17% from the figure as of Dec 31, 2022.
Net cash flow from operations was $174.4 million, up 32.5% year over year. The statutory surplus decreased 7.1% from 2022 end to $1.5 billion as of Jun 30, 2023. Return on equity was 53.1% versus -6.1% in the year-ago quarter.
On Jun 20, 2023, RLI paid a quarterly dividend of 27 cents per share, up 3.8% from the prior payout. Over the last five years, the insurer has returned $761 million to shareholders.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
At this time, RLI Corp. has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 these revisions looks promising. Notably, RLI Corp. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
RLI Corp. is part of the Zacks Insurance - Property and Casualty industry. Over the past month, Progressive (PGR), a stock from the same industry, has gained 5.7%. The company reported its results for the quarter ended June 2023 more than a month ago.
Progressive reported revenues of $15.23 billion in the last reported quarter, representing a year-over-year change of +19.9%. EPS of $0.50 for the same period compares with $0.95 a year ago.
Progressive is expected to post earnings of $1.55 per share for the current quarter, representing a year-over-year change of +216.3%. Over the last 30 days, the Zacks Consensus Estimate has changed +15.6%.
Progressive has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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