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RLI's Q3 Earnings Surpass Expectations, Revenues Fall Short

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RLI Corp. (RLI - Free Report) reported third-quarter 2020 operating earnings of 42 cents per share against the Zacks Consensus Estimate of a loss of 10 cents per share. However, the bottom line plunged 26.3% from the prior-year quarter.

The company’s Casualty and Surety segments delivered solid performances in the quarter. Nonetheless, an active hurricane season weighed on the upside.

The company’s results benefited from higher premiums, offset by higher expenses.

RLI Corp. Price, Consensus and EPS Surprise

RLI Corp. Price, Consensus and EPS Surprise

Operational Performance

Operating revenues for the reported quarter were $233 million, up 1.7% year over year. This upside can be attributed to higher net premiums earned, partially offset by reduced net investment income. However, the top line missed the Zacks Consensus Estimate by 1.3%.

Gross premiums written increased 9.3% year over year to $302.9 million. This uptick can be attributed to solid performance of Casualty, Surety and Property segments. Net premiums written of $235 million increased 6.5% on a year-over-year basis, primarily due to higher premiums written in the Casualty and Property segments.

However, net investment income declined 5.6% year over year to $16.5 million.

Total expenses increased 8.9% year over year to $220 million, primarily due to higher loss and settlement expenses, interest expense on debt and general corporate expenses.

The company reported underwriting income of $1.2 million, which decreased 91.2% from the year-ago period primarily due to weak performance of the Property segment, partially offset by solid performance of the Casualty and Surety segments.

Combined ratio deteriorated 600 basis points (bps) year over year to 99.5%.

Financial Update

The company exited the third quarter with total investments and cash of $2.7 billion, up 7.3% from 2019 end.

Book value was $24.40 per share as of Sep 30, 2020, up 10% from the figure as of Dec 31, 2019.

Long-term debt was $149.4 million, which inched up 0.1% from 2019 end.
Statutory surplus increased 1.7% to $1.05 billion as of Sep 30, 2020 from the figure as of Dec 31, 2019.

Return on equity was 16.9%, reflecting a contraction of 490 bps year over year.

Net cash flow provided by operations was $79.5 million in the quarter under review, down 2.4% from the year-ago period.

Dividend Update

On Sep 18, the company paid out a cash dividend of 24 cents per share, the same amount as the prior quarter.  Dividends totaled more than $532 million in the last five years.

Zacks Rank & Performance of Other Insurers

RLI currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other insurance industry players, which have reported third-quarter earnings so far, the bottom line of The Progressive Corporation (PGR - Free Report) , The Travelers Companies (TRV - Free Report) and W. R. Berkley (WRB - Free Report) beat the Zacks Consensus Estimate for earnings.

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