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To return more value to the shareholders, the board of directors of RLI Corp. (RLI - Analyst Report) will pay a special dividend of $5.00 per share. Concurrently, the board has also authorized a regular dividend of 30 cents per share. Both the special dividend as well as the regular dividend will be paid on December 20, 2011 to shareholders of record as of November 30, 2011.

The decision to authorize a special dividend came on the back of the company’s strong capital position and strength in business operations.

RLI Corp. has increased dividends for the past 36 years, the latest of which was a quarterly increase of 3.4% in May 2011. The company has also been paying dividends for 141 consecutive quarters.

Apart from paying dividends, the company also actively engages in buying back shares. During the third quarter, the company spent $3.8 million for share repurchases with $87.5 million still available under its authorization.

Over the span of last five years, RLI Corp. has paid back almost $600 million to its shareholders through dividends, special dividends and share buybacks.

The special dividend will require the company to dish out $105 million, well supported by the company’s strong liquidity. 

The company is focused on diversifying its product mix, as well as expanding its product offering. The company’s underwriting discipline is also expected to bode well given the stabilization in the markets. Also, acquisitions broaden its client base and help it to write higher premiums in the upcoming quarters.

The company scores strongly with the rating agencies and remains focused on returning value to its shareholders through dividend increases and share buybacks.This current special dividend authorization will also help to boost shareholder confidence in the company.

However, there was no spurt in the stock price despite the announcement. It is likely possible that the stock had factored in the expectation of the special dividend. Last year, on December 1, RLI Corp had authorized a special dividend of $7.00 per share. The share price of RLI Corp. inched down 0.8% to close at $70.58 as on Wednesday.

The Zacks Consensus Estimate for fourth-quarter 2011 is $1.14 per share. For full years 2011 and 2012, the Zacks Consensus Estimates are, respectively, $5.39 per share and $4.39 per share.

We retain our Neutral recommendation on RLI Corp. The quantitative Zacks #3 Rank (short term Hold rating) on the stock indicates no clear directional pressure on the shares over the near term.

Headquartered in Peoria, Illinois, RLI Corp. is a specialty property-casualty (P&C) underwriter that caters primarily to niche markets through its main operating subsidiary, RLI Insurance Company. The company competes with ACE Limited (ACE - Analyst Report), CNA Financial Corporation (CNA - Snapshot Report) and The Travelers Companies, Inc. (TRV - Analyst Report).

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