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Why Is RLI Corp. (RLI) Up 16% Since Last Earnings Report?

It has been about a month since the last earnings report for RLI Corp. (RLI). Shares have added about 16% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is RLI Corp. due for a pullback? 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 Q3 Earnings Top Estimates, Decline Y/Y on High Cat Loss

RLI Corp. reported third-quarter 2022 operating earnings of 50 cents per share, beating the Zacks Consensus Estimate by 51.5%. The bottom line, however, declined 23.1% from the prior-year quarter.

The quarterly results benefited from solid performance across all its segments and favorable reserve development, and higher net investment income. However, third-quarter results were affected by losses stemming from Hurricane Ian.

Operational Performance

Operating revenues for the reported quarter were $312.7 million, up 15.3% year over year, driven by 15% higher net premiums earned and 19.2% higher net investment income. The top line, however, missed the Zacks Consensus Estimate by 1.3%.

Gross premiums written increased 13.3% year over year to $403.8 million. This uptick can be attributed to the solid performance of Casualty (up 3.3%), Surety (up 12%) and Property segments (up 39.8%).

Net investment income increased 19.2% year over year to $21.3 million.

Total expenses increased 17.8% year over year to $287.4 million, primarily due to higher policy acquisition costs, insurance operating expenses, loss and settlement expenses, general corporate expenses and interest expenses on debt.

Underwriting income of $8.8 million decreased 35.8%, primarily due to the lower profitability at its Property and Surety segments. Underwriting income was impacted by losses stemming from Hurricane Ian that lowered underwriting income by $34.8 million.

The combined ratio deteriorated 240 basis points (bps) year over year to 97.

Financial Update

RLI exited the third quarter of 2022 with total investments and cash of $3.7billion, up 16.6% from 2021 end.

Book value was $30.72 per share as of Sep 30, 2022, up 16% from the figure as of Dec 31, 2021.

Long-term debt was $50 million, down 50% from 2021 end.

Net cash flow from operations was $112.2 million, down 3.2% year over year.

The statutory surplus decreased 3.6% from 2021 end to $1.2 billion as of Sep 30, 2022.

Return on equity was 22.2%, reflecting an expansion of 250 bps year over year.

Dividend Update

RLI paid out a quarterly dividend of 26 cents in the third quarter. RLI’s cumulative dividends total more than $513 million paid over the last five years.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

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.

Outlook

RLI Corp. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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