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RLI Stock Surges 43% in the Past 12 Months: Here's Why

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That RLI Corp. (RLI - Free Report) stock is favored by investors is noticeably confirmed by its share price movement. Shares of the company have soared nearly 43% in a year’s time, outperforming its industry's rally of roughly 11.9%.



What’s Behind the Price Surge?

The property and casualty (P&C) insurer has been witnessing top-line growth over a considerable period of time with the company registering a 5.5% increase in the first half of 2018. This improvement was attributable to a continued increase in premiums (a 5.2% rise during the first half). Riding on the strength of solid operating results, a wide range of product offerings and a consistent expansion of business, we expect this growth trajectory to continue in the near term.

The company has been displaying favorable underwriting results, boasting an excellent track record of delivering underwriting profits in 37 of the past 41 years, especially in the last 22 years. Apart from a compelling product portfolio, efforts in improving specialty lines insurance have come to fruition with the display of underwriting profitability. We expect this momentum to sustain as well going forward.

Moreover, combined ratio — reflecting its underwriting profitability — has displayed a stellar track record by maintaining the metric below 100 for 22 consecutive years and less than 90 for 12 straight years. Despite a challenging operating environment, the company has been able to maintain this brilliant growth track, reflecting a superior underwriting discipline. In order to fortify its underwriting results, the company has decided to get rid of the underperforming products from its property business.

Banking on the rising interest rates, the company has been experiencing better investment results over the past few years and this momentum continued during the first half of 2018 as well with the company registering a 9.8% improvement. Therefore, investment results are likely to increase on the back of a growing investment portfolio as well as higher new money rates.

On the back of a robust capital position, RLI Corp. has been increasing dividends over the last 43 years. In the preceding decade, the average annual growth rate of the P&C insurer’s quarterly dividend came in at 6.2% while the insurer’s total cumulative dividends amounted to more than $613 million. Also, in the last decade, the company could successfully return nearly $1.2 billion to its shareholders.

The company has also been paying special dividends to investors over the last few years, thus evolving as an attractive pick for yield-seeking investors.

Other Noteworthy Factors

RLI Corp. holds a Zacks Rank #2 (Buy). With optimism surrounding the stock’s healthy performance, the Zacks Consensus Estimate for 2018 and 2019 earnings has been revised about 1.3% and 1.4% upward, respectively, over the past 60 days.

The consensus mark for current-year earnings per share is pegged at $2.28, representing a substantial year-over-year surge of 41.6%.

Also, the company delivered a positive earnings surprise in all the last four quarters with an average beat of 32.68%.  

Other Stocks to Consider

Investors interested in other top-ranked stocks from the insurance industry can also consider Alleghany Corporation (Y - Free Report) , NMI Holdings Inc. (NMIH - Free Report) and The Progressive Corporation (PGR - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). 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 trailing four quarters with an average beat of 17.61%.

NMI Holdings provides private mortgage guaranty insurance services in the United States. The company pulled off positive surprises in all the trailing four quarters with an average positive surprise of 29.85%.

Progressive Corporation provides personal and commercial auto insurance, residential property insurance and other specialty property-casualty insurance plus related services, primarily in the United States. The company came up with positive surprises in all the preceding four quarters with an average earnings surprise of 9.19%.

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