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Here's Why You Should Retain RLI Stock in Your Portfolio

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RLI Corp. (RLI - Free Report) has been gaining momentum on the back of a compelling product portfolio, rate increases, improved retention, higher premium receipts and sufficient liquidity.

Optimistic Growth Projections

The Zacks Consensus Estimate for 2024 and 2025 earnings per share is pegged at $5.54 and $5.82, indicating an increase of 12.1% and 4.9% from the year-ago reported figure, driven by 15.3% and 9.1% higher revenues of $1.63 billion and $1.78 billion, respectively.

Estimate Revision

The Zacks Consensus Estimate for 2024 and 2025 has moved 0.5% and 1.04% north, respectively, in the past seven days. This should instill investors' confidence in the stock.

Earnings Surprise History

RLI has a solid track record of beating earnings estimates in three of the last four quarters while missing in one, the average being 137.08%.

Zacks Rank & Price Performance

The company currently carries a Zacks Rank #3 (Hold). Year to date, the stock has gained 6.4% compared with the industry’s growth of 13%.

Zacks Investment Research
Image Source: Zacks Investment Research

Business Tailwinds

Product diversification across the Casualty, Property and Surety segments of the company has fueled the insurer’s growth and financial success. The Casualty segment continues to gain from an expanded distribution base in personal umbrella and rate increases.

The commercial property business has been gaining from higher wind and earthquake exposure rates. Rate increases, improved retention and new opportunities in the inland marine space should benefit marine products.

The Surety segment continues to benefit from its compelling product portfolio, growth within existing accounts and writing of bonds with new customers. Building materials inflation and new accounts will aid commercial and contract surety businesses in the future. RLI boasts solid operating results and its financial position remained strong. Operating cash flows should gain from higher premium receipts.

The insurer has a sound capital structure, helping it meet the interests of its policyholders, enhance operations in the insurance sector and aid growth in its book value for the long term. The company’s return on equity was 28.1% in 2023, expanding 270 basis points year over year. Such a robust capital position provides significant financial flexibility to the operating subsidiaries.

RLI has been paying dividends for 187 consecutive quarters and increased regular dividends in each of the last 48 years, witnessing an eight-year (2016-2023) CAGR of 3.9%. Its dividend yield of 0.7% is better than the industry average of 0.2%, making the stock an attractive pick for yield-seeking investors. In addition, the insurer has also been paying special dividends since 2011. The recent approval of $2 in special dividend in November 2023 marks the 14th straight special dividend. The company has $87.5 million of remaining capacity from the repurchase program.

Stocks to Consider

Some better-ranked stocks from the property and casualty insurance industry are Axis Capital Holdings Limited (AXS - Free Report) , Mercury General Corporation (MCY - Free Report) and Arch Capital Group Ltd. (ACGL - Free Report) . While Axis Capital and Mercury General sport a Zacks Rank #1 (Strong Buy) each, Arch Capital carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Axis Capital has a solid record of beating earnings estimates in each of the trailing four quarters, the average being 102.57%. Year to date, the insurer has gained 11.5%.

The Zacks Consensus Estimate for the company’s 2024 and 2025 earnings per share is pegged at $10.10 and $11.07, indicating a year-over-year increase of 2.5% and 9.6%, respectively.

Mercury General beat estimates in three of the last four quarters and matched in one, the average being 3,417.48%. Year to date, the insurer has rallied 36.1%.

The Zacks Consensus Estimate for the company’s 2024 and 2025 earnings per share is pegged at $2.90 and $3.90, indicating a year-over-year rise of 866.67% and 34.48%, respectively.

Arch Capital has a solid record of beating earnings estimates in each of the trailing four quarters, the average being 27.32%. Year to date, ACGL has jumped 14.9%.

The Zacks Consensus Estimate for the company’s 2024 and 2025 revenues is pegged at $15.52 billion and $16.93 billion, indicating a year-over-year increase of 15% and 9%, respectively.

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