In a concerted effort to enhance shareholders value, the Board of Directors of RLI Corp. (RLI - Analyst Report) authorized an increase of approximately 6.7% in its dividend. The company will now pay a quarterly dividend of 32 cents per share, up from 30 cents per share paid earlier.
The newly increased dividend will be paid on June 20, 2012 to the shareholders as of May 31, 2011. The dividend yield is 1.86%.
RLI Corp. has been hiking its dividend over the past 37 years. The previous hike was authorized in May 2011, when the board approved a 3.4% increase in dividend. The company has a record of paying dividend for 144 consecutive quarters.
The company has always remained focused on returning more value to its shareholders. The company as such had paid special dividend once each in the last two years. A special dividend of $5.00 per share was paid in December 2011.
However, there was no jump in the share price of RLI Corp. despite the announcement. It is likely that the news of the dividend increase was more than offset by the company’s lower-than-expected quarterly performance.
The company’s first quarter operating earnings lagged the Zacks Consensus Estimate by a dime and were 17.9% below the year-ago figures. The year-over-year decline in operating earnings per share was due to lower underwriting income at Casualty and Surety, partially offset by higher income at Property.
Also, there was no earnings momentum over the last 7 seven days. We believe the company’s effort to return more value to shareholders might encourage analysts to pull their estimates upward. The Zacks Consensus Estimate for second quarter 2012 and full-year 2012 are, respectively, $1.15 and $4.09 per share.
With the improving pricing scenario in the insurance market supported by RLI Corp.’s strong infrastructure, we can expect the company to perform well in the coming quarters. The company also has a favorable loss reserve ratio when compared with the previous year along with increasing statutory reserve.
However, continued low interest rate environment keeps us on the sidelines.
We retain our Neutral recommendation on RLI Corp. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the shares over the near term.
Headquartered in Peoria, Illinois, RLI Corp. is a specialty property-casualty 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).