It has been about a month since the last earnings report for RLI Corp. (RLI - Free Report) . Shares have added about 5.3% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
RLI Q1 Earnings and Revenues Miss Estimates
RLI’s first-quarter 2020 operating earnings of 66 cents per share missed the Zacks Consensus Estimate by 9.6%. Also, the bottom line deteriorated 7% from the prior-year quarter.
RLI witnessed improved premiums from Casualty and Property segments along with increase in net investment income in the reported quarter.
Operating revenues for the reported quarter totaled $233 million, up 5.4% year over year. This upside can be attributed to higher net premiums earned and net investment income. However, the top line missed the Zacks Consensus Estimate by 1.3%.
Gross premiums written increased 6% year over year to $245.8 million. This uptick can be attributed to solid performance of Casualty and Property segments.
Total expenses increased 7.8% year over year to $202 million, primarily due to increased loss and settlement expenses, policy acquisition costs and interest expense on debt.
Net investment income rose nearly 7.3% year over year to $17.8 million. The company reported underwriting income of $17.2 million, which decreased 23.2% from the year-ago period due to poor performance of Casualty and Surety segment, partially offset by solid performance of the Property segment.
Combined ratio deteriorated 300 basis points (bps) year over year to 92%.
The company exited the first quarter with total investments and cash of $2.4 billion, down 5.6% from 2018 end.
Book value was $20.38 per share as of Mar 31, 2020, up 8.1% from the figure as of Dec 31, 2019.
Long-term debt was $149.3 million.
Statutory surplus decreased 8.4% to $943.1 million as of Mar 31, 2020 from the number as of Dec 31, 2019.Return on equity was 9.4%, reflecting a decrease of 690 basis points year over year.
Net cash flow used in operations was $5.8 million in the quarter under review compared to net cash flow provided by operations of $30.8 million in the year-ago period.
On Mar 20, the company paid out a cash dividend of 23 cents per share. Dividends totaled $527 million in the last five years.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -9.68% due to these changes.
At this time, RLI Corp. has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, RLI Corp. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.