News

It has been about a month since the last earnings report for RLI Corp. (RLI). Shares have added about 9.9% 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 the most recent earnings report in order to get a better handle on the important drivers.

RLI's Stock Gains Following Q3 Earnings and Revenue Beat

RLI Corp. reported third-quarter 2024 operating earnings of $1.31 per share, which beat the Zacks Consensus Estimate by 33.7%. The bottom line more than doubled year over year. The quarterly results reflected the continued underwriting-focused business model and the strength of its diversified portfolio.

RLI's Operational Performance

Operating revenues for the reported quarter were $426 million, up 1.4% year over year, driven by 22.3% higher net premiums earned and 14.8% higher net investment income. The top line beat the Zacks Consensus Estimate of $420 million. Gross premiums written increased 13% year over year to $563.4 million. This uptick can be attributed to the solid performance of the Casualty (up 15.7%), Property (up 9.6%) and Surety segments (up 9%). Our estimate was $572.3 million.

Net investment income increased 15% year over year to $36.7 million. Our estimate was $39.1 million. The investment portfolio’s total return was 4.8% in the quarter. The Zacks Consensus Estimate was pegged at $36 million. Total expenses increased 11.3% year over year to $354.4 million due to higher loss and settlement expenses, higher policy acquisition costs, insurance operating expenses and general corporate expenses. Our estimate was $405.4 million.

Underwriting income increased to $40.7 million from $4.2 million in the year-ago quarter. The combined ratio improved 910 basis points (bps) year over year to 89.6. The Zacks Consensus Estimate for the metric was pegged at 96, while our estimate was 103.1.

Financial Update

RLI exited the quarter with total investments and cash of $4.2 billion, up 14.9% from 2023 end. Book value was $38.17 per share as of Sept, 30, 2024, up 26% from the figure as of Dec. 31, 2023.

Net cash flow from operations was $219.4 million, up 122.5% year over year.
The statutory surplus increased 18.8% from the end of 2023 to $1.8 billion as of Sept. 30, 2024. Return on equity was 38.4%, up 1810 bps from the year-ago period.

RLI's Dividend Update

On Sept. 20, 2024, RLI paid a dividend of 29 cents. RLI’s cumulative dividends totaled more than $822 million in the last five years.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -37.38% due to these changes.

VGM Scores

At this time, RLI Corp. has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions 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.

Performance of an Industry Player

RLI Corp. belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, Travelers (TRV), has gained 0% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.

Travelers reported revenues of $11.85 billion in the last reported quarter, representing a year-over-year change of +10.7%. EPS of $5.24 for the same period compares with $1.95 a year ago.

Travelers is expected to post earnings of $6.28 per share for the current quarter, representing a year-over-year change of -10.4%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.8%.

Travelers has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.