RLI Corp. posted third-quarter earnings outperforming the Zacks
Consensus Estimate. Results declined year over year due to higher
expenses. Underwriting results declined primarily on the back of
weak underwriting performance in the Casualty segment.
Subsequently, the combined ratio deteriorated. Nevertheless, the
company remains focused on leveraging its expertise in niche
markets. Given the improving pricing scenario in the insurance
market and widened product lines, we expect RLI Corp. to perform
well in the coming quarters. The leveraging has strengthened its
equilibrium with improving cash balance and in-line debt balance.
It continues to return value to shareholders through regular
dividend hikes and special dividends. However, total expenses
witnessed an increase in the quarter. Hence, we remain Neutral on
Headquartered in Peoria, IL, RLI Corp. (RLI) is a specialty
property-casualty (P&C) underwriter that caters primarily to
niche markets through its main operating subsidiary, RLI Insurance
Company. Other subsidiaries include Mt. Hawley Insurance Company
and RLI Indemnity Company. The company, founded in 1965, serves 50
states and the District of Columbia.
RLI Corp. classifies its operations into three distinct segments
- Casualty, Property, and Surety.
Casualty (generated 54% of the gross premium written in 2013)
The segment comprises general liability, personal umbrella,
transportation, executive products, commercial umbrella,
multi-peril program business, and other specialty coverage. In
addition, the segment provides employers' indemnity and in-home
business owners' coverage.
Property (32%) The segment provides commercial property
coverage, including excess and surplus (E&S) lines and
specialty insurance such as fire, earthquake, flood and inland
marine. Marine operations include cargo, hull, protection and
indemnity, primary and excess liabilities, yachts, and other marine
Surety (14%) The segment specializes in writing small-to-large
commercial and small contract surety coverage, as well as those for
the energy (plugging and abandonment of oil wells), petrochemical
and refining industries.
RLI Corp. distributes its products through branch offices to
wholesale and retail brokers, independent agents and e-commerce
channels throughout the United States including Puerto Rico, the
Virgin Islands and Guam.
As of Sep 30, 2014, the company had total assets of $2.93
billion (up 1.4% year over year), long-term debt of $149.6 million
(down 40% year over year) and shareholder equity of approximately
$933.5 million (up 9.2% year over year).
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