A month has gone by since the last earnings report for RLI Corp. (RLI Quick QuoteRLI - Free Report) . Shares have lost about 3.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is RLI Corp. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

RLI Q4 Earnings Beat on Higher Underwriting, Revenues Miss

RLI Corp.  reported fourth-quarter 2021 operating earnings of $1.26 per share, beating the Zacks Consensus Estimate by 35.9%. The bottom line improved 38% from the prior-year quarter.

The quarterly results benefited from a not-so-active catastrophe environment, favorable reserve development and solid investment returns.

Operational Performance

Operating revenues for the reported quarter were $275.9 million, up 14.2% year over year, driven by 14.7% higher net premiums earned and 7.7% higher net investment income. The top line missed the Zacks Consensus Estimate of $276 million by a whisker.

Gross premiums written increased 12.2% year over year to $337.2 million. This uptick can be attributed to the solid performance of Casualty (up 8.9%), Surety (up about 23%) and Property segments (up 7.1%).

Net investment income increased 7.7% year over year to $17.9 million.

Total expenses increased 5.1% year over year to $214 million, primarily due to higher policy acquisition costs, operating expenses and interest expense on debt.

Underwriting income of $49.7 million increased 84.1% from the year-ago period primarily due to the strong performance of the Property and Surety segments.

The combined ratio improved 730 basis points (bps) year over year to 80.7.

Full-Year Highlights

Adjusted income of $3.87 per share beat the Zacks Consensus Estimate of $3.50. The bottom line increased 49.4% year over year.

Total revenues increased 12.4% from the year-ago level to about $1 billion but missed the Zacks Consensus Estimate of $1.1 billion.

The last year marked the 26th consecutive year of underwriting profit. Combined ratio 520 bps to 86.8.

Financial Update

RLI exited 2021 with total investments and cash of $3.2 billion, up 11.5% from 2020 end.

Book value was $27.14 per share as of Dec 31, 2021, up 20% from the figure as of Dec 31, 2020.

Long-term debt was $199.7 million, which jumped 33.6% from 2020 end.

The statutory surplus increased 10.6% year over year to $1.12 billion as of Dec 31, 2021.

Return on equity was 18.3%, reflecting an expansion of 220 bps year over year.

Dividend Update

RLI paid out a special dividend of $2.00 per share and a quarterly dividend of 25 cents for a total of $101.9 million to shareholders in the fourth quarter.

RLI has paid dividends for 182 consecutive quarters and increased regular dividends in the last 46 years. Over the last 10 years, the company has returned about $1.13 billion to shareholders and the regular quarterly dividend has grown 5.2% per year on average.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

Currently, RLI Corp. has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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 #2 (Buy). We expect an above average return from the stock in the next few months.