Shares of RLI Corp. RLI have gained 17.9% in six months, outperforming the industry’s 11.4% growth. The insurer also outperformed the Zacks S&P 500 composite and the Finance sector’s return of 11.1% and 8.1%, respectively, in six months. With a market capitalization of $7.64 billion, the average volume of shares traded in the last three months was 0.1 million.

RLI Outperforms Industry, Sector, S&P in 6 Months

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This property and casualty insurer has a solid track record of beating earnings estimates in each of the last four quarters, the average being 20.99%.

RLI Trading Above 50-Day and 200-Day Moving Averages

Shares of this Zacks Rank #3 (Hold) property and casualty insurer closed at $166.88 on Tuesday and are trading above its 50-day and 200-day simple moving averages (SMA) of $166.73 and $151.20, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.

Growth Projection for RLI

The Zacks Consensus Estimate for RLI’s 2024 earnings per share indicates an increase of 18.4% from the year-ago reported number. The consensus estimate for revenues is pegged at $1.67 billion, implying a year-over-year improvement of 17.9%.

The consensus estimate for 2025 earnings per share and revenues indicates an increase of 7.3% and 9.5%, respectively, from the corresponding 2024 estimates.

Earnings have grown 18.7% in the past five years, better than the industry average of 11.4%.

Will the Bull Run Continue?

RLI continues to grow in product diversification. The top line is set to benefit from a compelling product portfolio, focus on introducing new products, re-underwriting several of its products, sturdy business expansion, sustained rate increase and expanded distribution. 

RLI is exposed to catastrophe losses that induce underwriting volatility by the nature of its operations. Nonetheless, the insurer has a reinsurance program in place to cap its losses from catastrophes. It maintains a conservative underwriting and reserving policy and continues to achieve favorable reserve releases from the prior years.

Despite exposure to cat loss, the combined ratio, which reflects its underwriting profitability, has been exemplary. It is continuously making efforts to boost underwriting results. To that end, RLI dropped the underperforming products from its property business.

With regards to wealth distribution, RLI boasts an impressive dividend track record. RLI has been paying dividends for 187 consecutive quarters and increased regular dividends in each of the last 49 years, witnessing a five-year (2019-2024) CAGR of 8.8%. Its dividend yield of 0.7% is better than the industry average of 0.2%, making the stock an attractive pick for yield-seeking investors. In addition, the insurer has also been paying special dividends since 2011.

The insurer has been strengthening its balance sheet by improving liquidity and leverage. A sound capital structure helps it meet the interests of its policyholders, enhance operations in the insurance sector and aid growth in its book value for the long term.

RLI’s Favorable Return on Capital

RLI’s return on equity has also been improving over the last few quarters, reflecting its efficiency in utilizing shareholders’ funds. The trailing 12 months ROE was 19% compared favorably with the industry average of 7.5%.

Return on invested capital has also been improving over the last few quarters while the insurer has been making investments, reflecting RLI’s efficiency in utilizing funds to generate income.  ROIC in the trailing 12 months was 8.8%, which compared favorably with the industry’s average of 5.8%.

Key Picks

Investors interested in the property and casualty insurance industry may look at some better-ranked players like First American Financial Corporation FAF, Root, Inc. ROOT and The Allstate Corporation ALL, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for First American’s 2024 and 2025 earnings implies year-over-year growth of 7.1% and 30.6%, respectively. The Zacks Consensus Estimate for FAF’s 2024 and 2025 revenues implies year-over-year growth of 1.2% and 17.1%, respectively. In six months, shares of FAF have inched up 22.6%.

The Zacks Consensus Estimate for Root’s 2024 and 2025 revenues implies year-over-year growth of 147.9% and 3.8%. It beat earnings estimates in each of the past four quarters, with an average surprise of 127.21%. In six months, shares of ROOT have skyrocketed 77.9%.

The Zacks Consensus Estimate for The Allstate’s 2024 and 2025 revenues implies year-over-year growth of 1611.58% and 17.8%, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 135.21%. In six months, shares of ALL have gained 20.8%.

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