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Here's Why RLI Corp. (RLI) Stock is an Attractive Bet Now
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RLI Corp. (RLI - Free Report) has been gaining momentum from its product diversification, strong underwriting income and strong capital position.
The stock has seen its estimates for 2021 move up nearly 3.8% in the past 30 days, reflecting investor optimism.
The company delivered an earnings surprise in three of the last four reported quarters with the average beat being 153.86%.
The company has been effectively improving its return on equity (ROE) over the years. ROE of 11.2% in the trailing twelve months was better than the industry average of 5.6%, reflecting the company’s efficiency in utilizing shareholders’ fund.
The Casualty segment continues to benefit from rate increases and expanded distribution. It witnessed 6% top-line growth in 2020. The company expects to see opportunities in both the personal and commercial umbrella businesses.
The Surety segment, being the most competitive, remains focused on customers with strong balance sheets and good management, which have been beneficial during the economic uncertainty resulting from the pandemic. Compelling product portfolio, new products and business expansion and operational strength are expected to drive revenues in both the segments in the near term.
RLI Corp. continued to evaluate areas for efficiency gains and expense savings. It increased investment in technology, particularly those related to customer experience, and ease of doing business.
RLI Corp.’s combined ratio was 92in 2020, which represented the 25th consecutive year of reporting an underwriting profit. Its strong underwriting performance, combined with investment income, resulted in $2.59 per share of operating income, which grew 0.8% year over year.
This Zacks Rank #2 (Buy) property and casualty insurer boasts a solid balance sheet with high liquidity and improving leverage. Its debt to capital of 11.9% betters the industry average of 20.6%. In addition, it continued to maintain a cash and cash equivalent position of $62.2 billion, which grew 32.7% year over year.
Furthermore, its times interest earned, a measure to identify the company ability to service debt, of 25.9 is good compared with the industry’s average of 12.4, implying that its earnings are sufficient to cover interest obligations.
This property and casualty insurer raised its dividend at a six-year (2014-2020) CAGR of 39.3%. In 2020, it marked the 45th consecutive year of increasing quarterly dividend. With special dividends, it has returned over $1.1 billion in dividends to shareholders over the last decade. Its current dividend yield of 0.9% is better than the industry average of 0.6%, which makes the stock an attractive pick for yield-seeking investors.
Shares of RLI have gained 8.6% in the past year against the industry’s decline of 2%. The company’s policy to ramp up its growth profile and capital position should drive shares higher.
The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $2.75 and $3.05, indicating year-over-year increase of nearly 6.1% and 10.9%, respectively.
Alleghany’s bottom line surpassed estimates in two of the last four quarters (missed in the other two), the average beat being 34.08%.
Cincinnati Financial surpassed earnings estimates in two of the last four quarters, with the average surprise being 4.10%.
Arch Capital surpassed estimates in three of the last four quarters, with the average earnings surprise being 32.14%.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Here's Why RLI Corp. (RLI) Stock is an Attractive Bet Now
RLI Corp. (RLI - Free Report) has been gaining momentum from its product diversification, strong underwriting income and strong capital position.
The stock has seen its estimates for 2021 move up nearly 3.8% in the past 30 days, reflecting investor optimism.
The company delivered an earnings surprise in three of the last four reported quarters with the average beat being 153.86%.
The company has been effectively improving its return on equity (ROE) over the years. ROE of 11.2% in the trailing twelve months was better than the industry average of 5.6%, reflecting the company’s efficiency in utilizing shareholders’ fund.
The Casualty segment continues to benefit from rate increases and expanded distribution. It witnessed 6% top-line growth in 2020. The company expects to see opportunities in both the personal and commercial umbrella businesses.
The Surety segment, being the most competitive, remains focused on customers with strong balance sheets and good management, which have been beneficial during the economic uncertainty resulting from the pandemic. Compelling product portfolio, new products and business expansion and operational strength are expected to drive revenues in both the segments in the near term.
RLI Corp. continued to evaluate areas for efficiency gains and expense savings. It increased investment in technology, particularly those related to customer experience, and ease of doing business.
RLI Corp.’s combined ratio was 92in 2020, which represented the 25th consecutive year of reporting an underwriting profit. Its strong underwriting performance, combined with investment income, resulted in $2.59 per share of operating income, which grew 0.8% year over year.
This Zacks Rank #2 (Buy) property and casualty insurer boasts a solid balance sheet with high liquidity and improving leverage. Its debt to capital of 11.9% betters the industry average of 20.6%. In addition, it continued to maintain a cash and cash equivalent position of $62.2 billion, which grew 32.7% year over year.
Furthermore, its times interest earned, a measure to identify the company ability to service debt, of 25.9 is good compared with the industry’s average of 12.4, implying that its earnings are sufficient to cover interest obligations.
This property and casualty insurer raised its dividend at a six-year (2014-2020) CAGR of 39.3%. In 2020, it marked the 45th consecutive year of increasing quarterly dividend. With special dividends, it has returned over $1.1 billion in dividends to shareholders over the last decade. Its current dividend yield of 0.9% is better than the industry average of 0.6%, which makes the stock an attractive pick for yield-seeking investors.
Shares of RLI have gained 8.6% in the past year against the industry’s decline of 2%. The company’s policy to ramp up its growth profile and capital position should drive shares higher.
The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $2.75 and $3.05, indicating year-over-year increase of nearly 6.1% and 10.9%, respectively.
Other Stocks to Consider
Investors interested in the property and casualty industry may also look at Alleghany , Cincinnati Financial Corporation (CINF - Free Report) and Arch Capital Group (ACGL - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Alleghany’s bottom line surpassed estimates in two of the last four quarters (missed in the other two), the average beat being 34.08%.
Cincinnati Financial surpassed earnings estimates in two of the last four quarters, with the average surprise being 4.10%.
Arch Capital surpassed estimates in three of the last four quarters, with the average earnings surprise being 32.14%.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>