On Feb 18, 2013, we upgraded our recommendation on
) to Outperform from Neutral based on its focus on business
expansion and an expected improvement in the rate environment.
This property and casualty insurer carries a Zacks Rank #2 (Buy).
Why the Upgrade?
Fourth-quarter earnings came in at 89 cents per share, much ahead
of the Zacks Consensus Estimate of 44 cents. Over the past four
quarters, RLI Corp. has delivered an average surprise of 26.4%.
Revenues increased 4.5% from the year-ago period to $171.4
million and was in line with the Zacks Consensus Estimate.
Following the release of the fourth-quarter results, the Zacks
Consensus Estimate for 2013 has gone up 2.1% to $4.31 per share.
Moreover, the Zacks Consensus Estimate for 2014 has also
increased 2.1% to $4.29 per share.
Through a strong local branch office network, broad range of
product offerings, and focus on specialty insurance lines, RLI
Corp. has generated underwriting profits through the last 16
consecutive years. It has also remained focused on strategic
partnerships and acquisitions to expand its operations and foray
into new markets. We believe the company will continue on this
path to reap benefits.
The company's sound capital structure helps it meet the interests
of its policyholders, enhance operations in the insurance sector
and aid the growth in its book value in the long term. Its
trailing 12 month Return on Equity (ROE) of 13.0% is much higher
than the sector average of 6.7%. It's low financial leverage and
strong fixed charge coverage ratios also provide significant
financial flexibility to its operating subsidiaries.
For the past 37 years the company has been increasing dividends
paid to its shareholders, which include an average quarterly hike
of 13.8% over the last 10 years. RLI Corp.'s dividend yield
currently stands at 1.84%, better than the sector average of
1.73%. Over the last 5 years, the company has returned more than
$570 million to shareholders in the form of share buybacks and
dividends, and has an $87.5 million remaining under its $100
million share repurchase program authorized in May 2010.
Other Stocks to Consider
Among others from the industry,
Cincinnati Financial Corp.
XL Group Plc.
Navigators Group Inc.
) carry a Zacks Rank #1 (Strong Buy) and are worth
CINCINNATI FINL (CINF): Free Stock Analysis
NAVIGATORS GRP (NAVG): Free Stock Analysis
RLI CORP (RLI): Free Stock Analysis Report
XL GROUP PLC (XL): Free Stock Analysis Report
To read this article on Zacks.com click here.