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RLI Q4 Earnings and Revenues Beat Estimates, Premiums Up

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RLI Corp.’s (RLI - Free Report) fourth-quarter 2018 operating earnings of 44 cents per share surpassed the Zacks Consensus Estimate by a whopping 566.7%. However, the bottom line declined 21.6% from the prior-year quarter.

Higher level of catastrophe losses was primarily responsible for this deterioration. Nonetheless, the company witnessed improved premiums across most of its product lines along with increase in net investment income in the reported quarter.

Full-Year Highlights

For 2018, RLI delivered operating earnings per share of $2.05, outpacing the Zacks Consensus Estimate by 19.2% but declining 10.9% year over year.

Total revenues of $853.5 million beat the consensus mark by 0.5% and also grew 7.6% year over year.

RLI Corp. Price, Consensus and EPS Surprise


RLI Corp. Price, Consensus and EPS Surprise | RLI Corp. Quote

Operational Performance

Operating revenues for the reported quarter totaled $220.9 million, up 8.9% year over year. This upside can be attributed to higher net premiums earned and net investment income. Also, the top line beat the Zacks Consensus Estimate by 1.3%.

Gross premiums written improved 12.4% year over year to $257.4 million. This uptick can be attributed to a solid performance across Casualty, Property and Surety segments.

Total expenses increased 11.1% year over year to $205.2 million, primarily due to higher loss and settlement expenses, policy acquisition costs plus interest expense on debt.

Net investment income rose nearly 17.4% year over year to $16.9 million. Total return from the investment portfolio was (0.9%).

The company reported underwriting income of $2.2 million, which tumbled 75.6% from the year-ago period. This downside was due to weak results in the Property and Surety segments, partially offset by a stronger performance in the Casualty segment. Loss from Hurricane Michael lowered underwriting income by $19.6 million.

Combined ratio deteriorated 370 basis points year over year to 98.9%.

Financial Update

The company exited the fourth quarter with total investments and cash of $2.2 billion, up 2.5% from the tally as of 2017 end.

Book value was $18.13 per share as of Dec 31, 2018, down 6.2% from the count as of Dec 31, 2017.

Long-term debt was $149.1 million, which inched up 0.1% from the figure at the end of 2017.

Statutory surplus declined 4% to $829.8 million as of Dec 31, 2018 from the number as of Dec 31, 2017.

Net cash flow from operations improved 4.1% to $53.7 million in the quarter under review.

Dividend Payout

On Dec 27, 2018, the company paid out a cash dividend of 22 cents per share. On the same day, the insurer paid a special dividend of $1 per share that led to a tax benefit of 1 cent ($0.6 million).

Notably, the company has been consistently paying dividends for 170 consecutive quarters and has made dividend hikes in in the last 43 straight years. In the last decade, the company has returned $1.2 billion to shareholders and the quarterly dividend has grown an average of 5.4% per year.

Zacks Rank

RLI carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Among other players from the insurance industry having reported fourth-quarter earnings so far, the bottom line of MGIC Investment Corporation (MTG - Free Report) and The Travelers Companies, Inc. (TRV - Free Report) beat the respective Zacks Consensus Estimate while that of The Progressive Corporation (PGR - Free Report) missed the same.

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