On Nov 8, 2013 we upgraded our recommendation on
) to Outperform from Neutral, based on its earnings
outperformance in the third quarter of 2013 that included 47.4%
positive earnings surprise. This Zacks Rank #1 (Strong Buy)
property and casualty insurer delivered an average positive
surprise of 38.8% over the past four quarters.
Why the Upgrade?
Estimates for RLI Corporation have been strengthening since the
company reported its third-quarter 2013 results on Oct 16.
Earnings per share for the reported quarter stood at $1.40,
surpassing the Zacks Consensus Estimate by 47%. RLI Corporation's
quarterly revenues of $188.3 million also beat the Zacks
Consensus Estimate by 7%.
Moreover, both top and bottom line increased from the year-ago
results by 11% and 37.2%, respectively. The improvement came on
the back of better underwriting results at property and casualty.
The top-line growth was fueled by higher premiums on the back of
better market conditions and new product offerings. These
positives, in turn, reinforce the long-term expansion plans of
RLI Corporation's strong local branch office network, broad range
of product offerings and focus on specialty insurance lines also
served as catalysts aiding the company's profits.
RLI Corporation has a sound capital structure that helps it meet
the interests of its policyholders, enhance operations in the
insurance sector and support growth in its book value in the long
term. As of Sep 30, 2013, equity portfolio had a dividend yield
Following the solid earnings results, the Zacks Consensus
Estimate for 2013 moved up 8.4% to $4.65 as 2 of 3 estimates were
raised in the last 30 days. Additionally, the estimate for 2014
also rose 8.1% to $4.55 as the 2 of estimates moved north over
the same time frame
Although continued low interest rate environment and the exposure
to cat losses remain as significant causes of concern, we expect
RLI Corporation to perform well in the upcoming quarters, given
the improving pricing scenario in the insurance market and
widened product lines. Moreover, the company also plans to focus
on leveraging its expertise in niche markets and enhance
shareholders' value through regular and special dividends. The
long-term expected earnings growth rate for this stock is
Other Property and Casualty Insurers that Warrant a
Along with RLI Corporation other outperformers in the Property
and Casualty insurance space include
Allied World Assurance Co.
Platinum Underwriters Holdings Ltd.
), each with a Zacks Rank #1.
ALLIED WORLD AS (AWH): Free Stock Analysis
PLATINUM UNDRWT (PTP): Free Stock Analysis
RLI CORP (RLI): Free Stock Analysis Report
ALLEGHANY CORP (Y): Free Stock Analysis
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