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RLI Stock Trading at a Premium to Industry: Should You Buy?
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RLI Corporation (RLI - Free Report) shares are trading at a premium to the Zacks Property and Property Insurance industry. Its price-to-book of 4.39X is higher than the industry average of 1.59X.
This company has a market capitalization of $7 billion. The average volume of shares traded in the last three months was 0.1 million.
Image Source: Zacks Investment Research
The stock is expensive compared with other players like The Travelers Companies Inc (TRV - Free Report) , Cincinnati Financial (CINF - Free Report) and W. R. Berkley Corporation (WRB - Free Report) , which are trading at a discount to the industry average.
RLI shares have gained 9.6% in the past three months, underperforming its industry but outperforming the sector and the Zacks S&P 500 composite’s return in the same time frame. A strong local branch office network, a broad range of product offerings, a focus on specialty insurance lines and an impressive record of underwriting profits poise the company for growth.
RLI Vs Industry, Sector & S&P
Image Source: Zacks Investment Research
RLI Trading Above 50-Day Moving Average
RLI shares are trading well above the 50-day moving average, indicating a bullish trend. Shares are trading near the high end of the company’s 52-week range.
Optimistic Analyst Sentiment Instills Confidence in RLI
One of the four analysts covering the stock has raised estimates for 2024 and 2025 over the past 60 days. The consensus estimate for 2024 and 2025 has moved 1.5% and 0.8% north, respectively, in the past 60 days.
The Zacks Consensus Estimate for 2024 implies a 24.3% year-over-year increase, while the same for 2025 suggests a 2.6% increase.
Factors Favoring RLI
RLI continues to grow on product diversification. The top line is set to benefit from a compelling product portfolio, focus on introducing new products, re-underwriting of several of its products, sturdy business expansion, sustained rate increase and expanded distribution.
RLI is exposed to catastrophe losses that induce underwriting volatility by the nature of its operations. Recently, the insurer estimated third-quarter pretax net catastrophe losses in the range of $35-$40 million, primarily due to Hurricanes Beryl and Helene. Nonetheless, the insurer has a reinsurance program in place to cap its losses from catastrophes. It maintains a conservative underwriting and reserving policy and continues to achieve favorable reserve releases from the prior years.
Despite exposure to cat loss, the combined ratio, which reflects its underwriting profitability, has been exemplary. It is continuously making efforts to boost underwriting results. To that end, RLI dropped the underperforming products from its property business.
With regards to wealth distribution, RLI boasts an impressive dividend track record. RLI has been paying dividends for 187 consecutive quarters and increased regular dividends in each of the last 49 years, increasing at a five-year (2019-2024) CAGR of 8.8%. Its dividend yield of 0.8% is better than the industry average of 0.2%, making the stock an attractive pick for yield-seeking investors. In addition, the insurer has also been paying special dividends since 2011.
The insurer has been strengthening its balance sheet with improving liquidity and leverage. A sound capital structure helps it meet the interests of its policyholders, enhance operations in the insurance sector and aid growth in its book value for the long term.
RLI’s Favorable Return on Capital
RLI’s return on equity has also been improving over the last few quarters, reflecting its efficiency in utilizing shareholders’ funds. The trailing 12 months ROE was 18.3%, which compared favorably with the industry average of 8%.
Return on invested capital has also been improving over the last few quarters while the insurer has been making investments, reflecting RLI’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 7.7%, comparing favorably with the industry’s average of 6.1%.
Average Target Price for RLI Suggests an Upside
Based on short-term price targets offered by four analysts, the Zacks average price target is $168.00 per share. The average suggests a potential 10.5% upside from Tuesday’s closing price of $152.10.
To Conclude
RLI is one of the industry’s most profitable P&C writers, with an impressive track record of delivering 28 consecutive years of underwriting profitability. A strong local branch office network, a broad range of product offerings, and a focus on specialty insurance lines should continue to contribute to its superior profitability. Its Growth Score of B instill confidence. The stock's impressive dividend history makes it an attractive pick for yield-seeking investors.
Image: Bigstock
RLI Stock Trading at a Premium to Industry: Should You Buy?
RLI Corporation (RLI - Free Report) shares are trading at a premium to the Zacks Property and Property Insurance industry. Its price-to-book of 4.39X is higher than the industry average of 1.59X.
This company has a market capitalization of $7 billion. The average volume of shares traded in the last three months was 0.1 million.
Image Source: Zacks Investment Research
The stock is expensive compared with other players like The Travelers Companies Inc (TRV - Free Report) , Cincinnati Financial (CINF - Free Report) and W. R. Berkley Corporation (WRB - Free Report) , which are trading at a discount to the industry average.
RLI shares have gained 9.6% in the past three months, underperforming its industry but outperforming the sector and the Zacks S&P 500 composite’s return in the same time frame. A strong local branch office network, a broad range of product offerings, a focus on specialty insurance lines and an impressive record of underwriting profits poise the company for growth.
RLI Vs Industry, Sector & S&P
Image Source: Zacks Investment Research
RLI Trading Above 50-Day Moving Average
RLI shares are trading well above the 50-day moving average, indicating a bullish trend. Shares are trading near the high end of the company’s 52-week range.
Optimistic Analyst Sentiment Instills Confidence in RLI
One of the four analysts covering the stock has raised estimates for 2024 and 2025 over the past 60 days. The consensus estimate for 2024 and 2025 has moved 1.5% and 0.8% north, respectively, in the past 60 days.
The Zacks Consensus Estimate for 2024 implies a 24.3% year-over-year increase, while the same for 2025 suggests a 2.6% increase.
Factors Favoring RLI
RLI continues to grow on product diversification. The top line is set to benefit from a compelling product portfolio, focus on introducing new products, re-underwriting of several of its products, sturdy business expansion, sustained rate increase and expanded distribution.
RLI is exposed to catastrophe losses that induce underwriting volatility by the nature of its operations. Recently, the insurer estimated third-quarter pretax net catastrophe losses in the range of $35-$40 million, primarily due to Hurricanes Beryl and Helene. Nonetheless, the insurer has a reinsurance program in place to cap its losses from catastrophes. It maintains a conservative underwriting and reserving policy and continues to achieve favorable reserve releases from the prior years.
Despite exposure to cat loss, the combined ratio, which reflects its underwriting profitability, has been exemplary. It is continuously making efforts to boost underwriting results. To that end, RLI dropped the underperforming products from its property business.
With regards to wealth distribution, RLI boasts an impressive dividend track record. RLI has been paying dividends for 187 consecutive quarters and increased regular dividends in each of the last 49 years, increasing at a five-year (2019-2024) CAGR of 8.8%. Its dividend yield of 0.8% is better than the industry average of 0.2%, making the stock an attractive pick for yield-seeking investors. In addition, the insurer has also been paying special dividends since 2011.
The insurer has been strengthening its balance sheet with improving liquidity and leverage. A sound capital structure helps it meet the interests of its policyholders, enhance operations in the insurance sector and aid growth in its book value for the long term.
RLI’s Favorable Return on Capital
RLI’s return on equity has also been improving over the last few quarters, reflecting its efficiency in utilizing shareholders’ funds. The trailing 12 months ROE was 18.3%, which compared favorably with the industry average of 8%.
Return on invested capital has also been improving over the last few quarters while the insurer has been making investments, reflecting RLI’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 7.7%, comparing favorably with the industry’s average of 6.1%.
Average Target Price for RLI Suggests an Upside
Based on short-term price targets offered by four analysts, the Zacks average price target is $168.00 per share. The average suggests a potential 10.5% upside from Tuesday’s closing price of $152.10.
To Conclude
RLI is one of the industry’s most profitable P&C writers, with an impressive track record of delivering 28 consecutive years of underwriting profitability. A strong local branch office network, a broad range of product offerings, and a focus on specialty insurance lines should continue to contribute to its superior profitability. Its Growth Score of B instill confidence. The stock's impressive dividend history makes it an attractive pick for yield-seeking investors.
Therefore, despite an expensive valuation and catastrophe losses, these tailwinds make this Zacks Rank #2 (Buy) stock worth buying. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.