RLI Corp.’s RLI strong local branch office network, a broad range of product offerings, its focus on specialty insurance lines and an impressive record of underwriting profits poise the insurer for growth.
RLI has underperformed its industry in the past year. Earnings increased 18.8% over the past five years, underperforming the industry’s average of 19.3%.
RLI continues to grow on product diversification. Its compelling product portfolio, focus on introducing new products, re-underwriting of several of its products, sturdy business expansion, sustained rate increase and expanded distribution poise this insurer well to generate an improved top line.
A conservative underwriting and reserving policy helps RLI achieve favorable reserve releases from the prior years despite incurring catastrophe losses.
RLI is one of the industry’s most profitable P&C writers, with an impressive track record of delivering 29 consecutive years of underwriting profitability.
This insurer has been enhancing shareholders' value by distributing wealth in the form of dividend hikes, special dividends and share buybacks. It boasts an impressive dividend track record. It has increased regular dividends in each of the last 50 years and paid special dividends since 2011, making the stock an attractive pick for yield-seeking investors.
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 drive its book value for the long term.
RLI’s return on equity (“ROE”) has also been improving over the last few quarters, reflecting its efficiency in utilizing shareholders’ funds. The trailing 12-month ROE was 16.6%, which compared favorably with the industry average of 8.3%.
Being a property and casualty insurer, RLI remains exposed to catastrophe loss stemming from earthquakes that primarily hit the West Coast and hurricanes in the Gulf and East Coast and Hawaii. This, in turn, induces underwriting volatility and weighs on its combined ratio.
RLI has been witnessing rising expenses over the years, primarily due to increasing loss and loss expenses that have been inducing margin contraction.
Return on invested capital (ROIC) 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. However, ROIC in the trailing 12 months was 1.9%, which compares unfavorably with the industry average of 6.4%.
Other key players in the insurance industry include The Progressive Corporation PGR, Kingstone Companies KINS and Palomar Holdings PLMR.
Progressive’s earnings surpassed estimates in each of the last four quarters, the average surprise being 18.49%. A compelling product portfolio, leadership position, healthy policies in force, better pricing and a solid retention ratio should continue to drive premium improvement for Progressive.
Distinctive new auto insurance options, along with competitive pricing, should help Progressive sustain improvement in policy life expectancy, a measure of customer retention.
Kingstone Companies is well poised for growth, given its heightened focus on its core business and scaling back of unprofitable non-core businesses. The insurer only writes businesses that meet its underwriting standards and profit-margin objectives.
KINS expects direct written premiums in the core business to grow between 15% and 25% in 2025.
Palomar’s earnings surpassed estimates in each of the last four quarters, the average surprise being 18.49%. It is poised to gain from the increased volume of policies written across the lines of business, strong retention rates, strategic expansion of products’ geographic and distribution footprint and new partnerships.
Palomar envisions being an industry leader in the crop business and among the top 10 crop premium riders in the United States by 2025. Its projections for the year exceed $200 million in premiums. It also believes that crops will secure $500 million of premiums in the intermediate future.
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RLI Corp. (RLI) : Free Stock Analysis Report
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