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RLI Q3 Earnings Surpass Estimates, Plunge Y/Y, Revenues Miss

Zacks Equity Research

RLI Corp.’s RLI third-quarter 2017 operating earnings of 4 cents per share surpassed the Zacks Consensus Estimate by a whopping 100%.

However, the bottom line plummeted 89.2% year over year. The third-quarter results were significantly impacted by the occurrence of Hurricanes Harvey, Irma and Maria that led to deterioration in the combined ratio as well. Nonetheless, the company witnessed a strong performance at its casualty and surety segments.

RLI Corp. Price, Consensus and EPS Surprise


RLI Corp. Price, Consensus and EPS Surprise | RLI Corp. Quote

Net income plunged 92% year over year to 4 cents per share.


Operational Performance

Operating revenues for the quarter totaled $196.2 million, down 0.5% year over year due to lower net premiums earned. Also, revenues missed the Zacks Consensus Estimate of $198 million by 0.9%.

Gross premiums written dipped 0.5% year over year to $220.4 million due to weaker performance by the Property and Surety segments.


Total expenses shot up 13.4% year over year to $200.8 million due to higher loss and settlement expenses and policy acquisition costs.

The company incurred an underwriting loss of $14.9 million against an underwriting income of 10.6 million, due to results hampered by back-to-back hurricanes. Combined ratio deteriorated 1400 basis points year over year to 108.2%. Nonetheless, the company has been able to deliver underwriting profits for the last 21 straight years. 

The property and casualty (P&C) insurer’s net investment income improved nearly 5.1% year over year to $14.2 million. Total return from the investment portfolio was 1.4%, while the bond portfolio returned 1.0%. The equity portfolio returned 3.4%.

Financial Update

The company exited the third quarter with total investments and cash of $2.2 billion, up 7.4% from the year-end 2016.

Book value was $19.95 per share as of Sep 30, 2017, up 6.5% from Dec 31, 2016.

Long-term debt was $148.9 million, reflecting a 0.1% increase from the 2016-end level.

Statutory surplus grew 4.8% year over year to $900.9 million.

Net cash flow from operations surged 33.6% to $71.4 million in the quarter.

Dividend Payout

On Sep 20, 2017, the company paid out a cash dividend of 21 cents per share, remaining unchanged from the prior quarter. In the last five years, the P&C insurer has paid cumulative dividends of over $635 million. 

Business Update

During the third quarter, the company saw its A+ (Superior) financial strength rating getting reiterated by the credit rating giant A.M. Best for its insurance subsidiaries namely, RLI Insurance Company, Mt. Hawley Insurance Company and Contractors Bonding and Insurance Company. 

Zacks Rank

Currently, RLI has a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here


Performance of Other Insurers

Among other players from the insurance industry having reported third-quarter earnings, the bottom line at Brown & Brown, Inc. BRO, MGIC Investment Corporation MTG and The Progressive Corporation PGR beat their respective Zacks Consensus Estimate.

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