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Why Is RLI Corp. (RLI) Up 8% 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 8% 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 drivers.

RLI Q1 Earnings Surpass Estimates, Revenues Increase Y/Y   

RLI Corp.’s first-quarter 2019 operating earnings of 71 cents per share surpassed the Zacks Consensus Estimate by 20.3%. The bottom line improved 18.3% from the prior-year quarter.

RLI witnessed improved premiums across most of its product lines along with increase in net investment income in the reported quarter.

Operational Performance

Operating revenues for the reported quarter totaled $221 million, up 8.3% 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 0.9%.

Gross premiums written increased 6.5% year over year to $230.9 million. This uptick can be attributed to solid performance of Casualty and Property segments

Total expenses increased 6.1% year over year to $187.4 million, primarily due to increased insurance operating expenses, loss and settlement expenses, policy acquisition costs, interest expense and general corporate expense.

Net investment income rose nearly 16.4% year over year to $16.6 million. Total return from the investment portfolio was 4.5%.

The company reported underwriting income of $22.4 million, which increased 28% from the year-ago period. This upside was due to solid results at the Property and Casualty segments, partially offset by soft performance of the Surety segment.

Combined ratio improved 180 basis points year over year to 89%.

Financial Update

The company exited the first quarter with total investments and cash of $2.3 billion, up 5.1% from 2018 end.

Book value was $20.08 per share as of Mar 31, 2019, up 12% from the figure as of Mar 31, 2018.

Long-term debt was $149.2 million.

Statutory surplus improved 9.7% to $910.2 million as of Mar 31, 2019 from the number as of Dec 31, 2018.

Return on equity was 16.3%, reflecting an increase of 530 basis points.

Net cash flow from operations doubled year over year to $30.8 million in the quarter under review.

Dividend Update

On Mar 20, 2019, the company paid out a cash dividend of 22 cents per share. Dividends totaled $601 million in the last five years.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

Currently, RLI Corp. has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile 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

RLI Corp. has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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