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Why Is RLI Corp. (RLI) Up 4.5% Since Last Earnings Report?

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It has been about a month since the last earnings report for RLI Corp. (RLI - Free Report) . Shares have added about 4.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is RLI Corp. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

RLI's Q4 Earnings Top Estimates on Strong Premium Growth

RLI Corp. reported fourth-quarter 2023 operating earnings of $1.54 per share, beating the Zacks Consensus Estimate by 6.9%. The bottom line improved 0.6% from the prior-year quarter.

The quarterly results reflect continued premium growth across all product segments.

Operational Performance

Operating revenues for the reported quarter were $378.4 million, up 15% year over year, driven by 14.9% higher net premiums earned and 14.4% higher net investment income. The top line, however, missed the Zacks Consensus Estimate by 2%. Gross premiums written increased 13% year over year to $434.4 million. This uptick can be attributed to the solid performance of the Casualty (up 7.5%), Property (up 23.5%) and Surety segments (up 10.9%). Our estimate was $459 million. Net investment income increased 14.4% year over year to $32.5 million. The Zacks Consensus Estimate for the metric was pegged at $33.5 million, while our estimate was $38.1 million. The investment portfolio’s total return was 6.4% in the quarter.

Total expenses increased 15.5% year over year to $292.5 million, primarily due to higher loss and settlement expenses, and higher policy acquisition costs, insurance operating expenses and general corporate expenses. Our estimate was $293.7 million. Underwriting income of $59.8 million increased 10.9%. Combined ratio deteriorated 60 basis points (bps) year over year to 82.7. The Zacks Consensus Estimate for the metric was pegged at 85, while our estimate was 82.7.

Full-Year Highlights

Operating earnings of $4.94 per share improved 5.3% from the prior-year quarter. Operating revenues were $1.4 billion million, up 15% year over year.

Net premiums earned increased 13.1% to $1.3 billion and were in line with our estimate. Underwriting income slipped 0.02% to $173.2 million. Our estimate was $173.6 million.  Combined ratio deteriorated 220 bps to 86.6 and was in line with our estimate. The investment portfolio’s total return was 8.8%.

Financial Update

RLI exited the quarter with total investments and cash of $3.6 billion, up 12.3% from 2022 end. Book value was $30.97 per share as of Dec 31, 2023, up 19.6% from the figure as of Dec 31, 2022.

Net cash flow from operations was $464.3 million, up 85.4% year over year.
The statutory surplus increased 5.8% from 2022 end to $1.5 billion as of Dec 31, 2023. Return on equity was 28.1%, expanding 270 bps from the year-ago period.

Dividend Update

The insurer paid a special dividend of $2.00 per share for the fourth quarter. Shareholder returns totaled $91.3 million. RLI has paid dividends for 190 consecutive quarters and increased regular dividends in each of the last 48 years. Over the last 10 years, the company has returned $1.41 billion to shareholders. The regular dividend has grown 4.7% per year on average.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, RLI Corp. has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, RLI Corp. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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