) has, yet again, successfully kept its earnings streak alive
with its first quarter earnings release. With its
first-quarter 2014 operating earnings of 57 cents per share
exceeding the Zacks Consensus Estimate by 5.6%, RLI Corporation
delivered four straight quarters of positive surprises. The
result also outpaced the year-ago quarter's earnings by 9.6%.
The improvement came on the back of an improved top line driven
by higher premiums and investment income.
First-quarter 2014 operating earnings include favorable
developments in Casualty's prior years' reserves of 14 cents, in
Property's prior years' reserves of 2 cents, in Surety's prior
years' reserves of 3 cents and catastrophe impact of 1 cent.
Including realized investment gains, net of tax of 9 cents per
share, RLI Corp. reported net income of 66 cents per share
compared with 57 cents per share in the first quarter of 2013.
The prior-year quarter net income included realized investment
gains, net of tax, of 5 cents per share.
Revenues in the quarter under review totaled $181.2 million,
improving 12.8% year over year, driven by 12% higher net premiums
earned, 5.4% increase in net investment income and 76% increase
in net realized investment gains.
Net investment income improved on the heels of a larger invested
asset base and stable reinvestment rates.
Total expense of RLI Corp. during the first quarter scaled up
11.2% year over year to $142.6 million. Higher interest expense
and loss and settlement expense primarily drove the increase.
Underwriting income for RLI Corp. was $22.9 million in the
quarter, up 13.6% year over year.
The combined ratio in the reported quarter improved 20 basis
points (bps) to 86%, driven by solid performance across all the
RLI Corp.'s total return from the investment portfolio was 2.7%
during the reported quarter. The bond portfolio returned 2.4%,
while the equity portfolio yielded a return of 3.6%.
RLI Corp. exited first quarter with total investments and cash of
$1.9 billion, up 1.6% from 2013-end.
Long-term debt was $149.6 million at the quarter-end, flat with
the 2013-end level.
RLI Corp.'s book value stood at $20.23 per share as of Mar 31,
2014, up 5% from Dec 31, 2013. The improvement came on the back
of solid underwriting performance and positive total return in
the investment portfolio.
The company has recorded a return on equity of 15.5% along with a
14.7% return on a comprehensive basis compared with a return on
equity of 11.9%, with 15.8% on a comprehensive basis, in the
prior year. Statutory surplus increased 3.2% over 2013-end to
$886.5 million as on Mar 31, 2014.
Cash used in operations was $2 million, lower than $6.3 million
used in the prior-year quarter.
On Mar 20, 2014, RLI paid a quarterly cash dividend of 17 cents
per share. Over the last five years, the company payout totals
more than $540 million.
Besides posting healthy earnings, RLI Corp. continues to deliver
robust underwriting income. Given the improving pricing scenario
in the insurance market and widened product lines, we expect RLI
Corp. to perform well in the upcoming quarters. It also remains
focused on expanding its product portfolio. The company plans to
focus on leveraging its expertise in niche markets as well.
Further, the company's focus upon returning value to
shareholders, through regular and special dividends, helps it
retain investor confidence as well as attract potential investors
toward the stock.
RLI Corp. currently carries a Zacks Rank #3 (Hold). Some
better-ranked property & casualty insurers that carry a Zacks
Rank #1 (Strong Buy) are
Everest Re Group Ltd
EMC Insurance Group Inc
). All these companies are slated to release their first-quarter
EMC INSURANCE (EMCI): Free Stock Analysis
EVEREST RE LTD (RE): Free Stock Analysis
RLI CORP (RLI): Free Stock Analysis Report
ALLEGHANY CORP (Y): Free Stock Analysis
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