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5 Reasons Why You Should Add RLI Stock to Your Portfolio

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Estimates for RLI Corp. (RLI - Free Report) have been revised upward over the past seven days, instilling analysts’ confidence in the stock post solid first-quarter earnings results. The stock has seen the Zacks Consensus Estimate for current-year earnings being raised 0.9% to $2.25.

RLI Corp. underwrites property and casualty insurance in the United States and internationally. The company boasts an enviable profile, emerging strong as one of the industry’s most profitable P&C writers with an impressive track record of underwriting profits in 37 of the past 41years, particularly the last 22 years. Shares of this Zacks Rank #1 (Strong Buy) property and casualty insurer have rallied 12.3% year to date, outperforming the industry’s increase of 0.04%.

Let’s focus on the factors making RLI Corp. an attractive stock to hold on to for greater returns.

Improving Top Line: Last few years saw RLI Corp.’s top line rise, witnessing a five-year CAGR of 38% on the back of a consistent improvement in premiums.  A compelling product portfolio, a strong local branch office network and a focus on specialty insurance lines should continue to help retain this momentum.

Exemplary Underwriting Results: The company’s combined ratio, which reflects its underwriting profitability, has been commendable. It has maintained the metric below 100 for 22 consecutive years and less than 90 for 12 straight years. This solid history of maintaining the combined ratio at favorable levels even in the toughest operating environment underlines the company’s superior underwriting discipline. To fortify its underwriting results, the company has decided to dump the underperforming products from its property business.

Prudent Capital Management: RLI Corp. has a robust capital management policy in place. It flaunts an annual dividend hike over the last 43 years. Last decade, the average annual growth rate of the P&C insurer’s quarterly dividend came in at 6.2%. The company has also been paying special dividends to its shareholders over the last few years, thus evolving as an attractive pick for yield-seeking investors.

Growth Projections: The Zacks Consensus Estimate for current-year earnings per share is pegged at $2.25 on revenues of $841.8 million, translating into a year-over-year increase of 39.8% and 6.2%, respectively.

Positive Earnings Surprise History: The company rides high on an encouraging earnings surprise history, having exceeded the Zacks Consensus Estimate in each of the trailing four quarters with an average beat of 33.65%. This recurrence of estimate beats is indicative of the company’s operational excellence.

Other Stocks to Consider

Investors interested in other stocks worth considering from the same space can also check out Alleghany Corporation (Y - Free Report) , The Navigators Group, Inc. (NAVG - Free Report) and The Progressive Corporation (PGR - Free Report) , each sporting a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. The company delivered positive surprises in three of the last four quarters with an average beat of 17.61%.

Navigators Group underwrites marine, property and casualty plus professional liability insurance products and services in the United States and worldwide. The company came up with positive earnings surprises in three of the trailing four quarters with an average beat of 14.66%.  

Progressive Corporation provides personal and commercial auto insurance, residential property insurance and other specialty property-casualty insurance and related services, primarily in the United States. The company pulled off positive surprises in three of the last four quarters with an average beat of 6.23%.  

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