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RLI Bolsters Shareholder Value, Increases Dividend by 4%

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The board of directors of RLI Corp.  (RLI - Free Report) recently approved a hike in the  quarterly dividend to enhance shareholder value. RLI will now pay out a dividend of 26 cents per share compared with 25 cents paid on Jun 18, 2021, reflecting an increase of 4%. Shares of RLI gained 0.07% in the last two trading days.

Shareholders of record as of May 31, 2022 will receive the increased dividend on Jun 21, 2022. Based on the closing share price of $116.60 on May 5, the raised payout represents a dividend yield of 0.9%, better than the industry average of nearly 0.3%. Prior to this, the insurer had raised its quarterly dividend by 4.2% to 25 cents per share last May.

RLI has been paying dividends for 183 consecutive quarters and increased regular dividends in the last 47 straight years, increasing at a nine-year (2014-2022) CAGR of 4.2%.

In addition, the insurer has also been paying special dividends since 2011. The recent approval of $2 in special dividend in November 2021 marks the 12th straight special dividend. With special dividends, 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. RLI did not repurchase any shares so far in 2022. It has $87.5 million of remaining capacity from the repurchase program.

The dividend increase is supported by the insurer’s strong capital structure. Its healthy balance sheet with unparalleled financial flexibility allows investment in the business.

In the first quarter of 2022, RLI produced solid operating results and its financial position remained strong. Operating cash flows in the first quarter of 2022 gained from higher premium receipts. Improved financial performance in 2021 resulted in a higher level of bonus and profit-sharing contributions that were paid in the first quarter of 2022, which also reduced operating cash flows in the current quarter.

RLI expects the cash generated by operations and investments to provide sufficient sources of liquidity to meet the anticipated needs over the next 12 to 24 months. The insurer’s revolving credit facility has a borrowing capacity of $60 million, which can be increased to $120 million under certain circumstances.

The insurer drives long-term sustainable growth for shareholders with the help of its product portfolio, careful selection of niche markets, distribution partners and customers and the strength of their balance sheet, which in turn enable it to hike regular dividends.

Shares of this Zacks Rank #1 (Strong Buy) P&C insurer have outperformed the industry in the past year. The stock has gained 5.7% against  the industry’s decrease of 0.3%. We expect improvement in the top line and a solid capital position to drive shares in the near term.

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Given the solid capital level of the insurance industry and improving operating backdrop favoring strong operational performance, insurers like The Travelers Companies, Inc. (TRV - Free Report) , Horace Mann Educators Corporation’s (HMN - Free Report) and American Financial Group’s (AFG - Free Report) have resorted to effective capital deployment to enhance shareholder value.

The Travelers Companies hiked its dividend by 6% in April 2022. TRV has a dividend yield of 2.1%, better than the industry average of 0.3%. Travelers maintains a conservative balance sheet among its peers. Banking on operational excellence and a solid capital position, the insurer has increased its dividend for the last 11 years.

Horace Mann Educators’s board of directors approved a 3.2% hike in its quarterly dividend in March 2022. HMN has a dividend yield of 3.4%, better than the industry average of 2.3%. Its solid financial foundation and operational performance will continue to generate capital, thereby helping Horace Mann to engage in shareholder-friendly moves apart from investing in business growth at returns that meet or exceed its return on equity targets.

American Financial’s board of directors approved a special cash dividend of $2.00 per share in March 2022. Besides the special cash dividend and regular dividend hike, the property and casualty insurer remains committed to returning excess cash to shareholders through share repurchases. AFG has a dividend yield of 1.5%, better than the industry average of 0.3%. The excess capital of AFG provides the financial flexibility to make opportunistic repurchases, pay additional special dividends, and grow specialty property and casualty business organically and through acquisitions and start-ups.

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

In the past year, shares of Travelers and American Financial have gained 6.5% and 15.3%, respectively, whereas Horace Mann has lost 6.5%.