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On Dec 26, Zacks Investment Research upgraded RLI Corp. (RLI - Analyst Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

RLI Corp. has witnessed rising earnings estimates on the back of solid earnings results. The company also announced a special dividend of $3.00 per share. Moreover, the property and casualty insurer delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 38.9%. The long-term expected earnings growth rate for this stock is 15%    

In the last reported quarter, RLI Corp.’s non-GAAP earnings came in at $1.40 per share, surpassing both the Zacks Consensus Estimate of 95 cents by 47% as well as the year-ago level of $1.02 by 37.2%.

The year-over-year improvement came on the back of better underwriting results in the Property and Casualty segments.

Underwriting income for RLI Corp. improved 72% year over year, with combined ratio improving by 720 basis points. The improvement was primarily attributable to better underwriting performance in the Property and Casualty segments.

In keeping with its consistent efforts to share more profit with the shareholders, the board of directors of RLI Corp. approved a special dividend of $3.00 per share in mid November.  RLI Corp. has been paying special dividends to its shareholders over the past few years. This is in addition to the regular dividend payout as well as dividend hikes made by the company. Its current dividend yields 1.4%.

The Zacks Consensus Estimate for 2013 increased 3.7% to $4.82 per share while the same for 2014 moved north by 1.4% to $4.62 over the last 60 days.

Other Stocks to Consider

Other players in the property and casualty industry, which look attractive at current levels, include Alleghany Corporation (Y - Snapshot Report), Allied World Assurance Company Holdings, AG (AWH - Snapshot Report), and AmTrust Financial Services, Inc. (AFSI - Snapshot Report). All these stocks hold the same Zacks Rank as RLI Corp.

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