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RLI Corp Members Get Rating Affirmations from A. M. Best - Analyst Blog

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The members of RLI Corp.RLI - RLI Insurance Company and its affiliates, Contractors Bonding and Insurance Company and Mt. Hawley Insurance Company - were affirmed with financial strength rating of A+ (Superior) and issuer credit ratings (ICR) of "aa" by A. M. Best. The outlook of the ratings for all these members is stable.

However, the ratings of another member, RLI Indemnity Company, which is Mt. Hawley's reinsured affiliate, remain under review with negative implications due to its pending sale to Clear Blue Financial Holdings, LLC. Moreover, the company has now been removed from RLI Corp.'s list of members.

Additionally, A. M. Best affirmed RLI Corp. with ICR of "a" and the debt rating of "a" on 4.875% senior unsecured notes worth $150 million, due 2023.

The ratings reflect RLI Corp.'s solid financial results in 2014 and favorable first-quarter 2015 earnings. Also, the ratings are suggestive of the company's superior capitalization, improving operating profitability over the years and excellent business profile as one of the leading specialty property/casualty insurance organizations in the United States.

RLI Corp. remains focused on niche underwriting by centralizing on the underserved markets. These markets help the company to protect itself from the various stages of the traditional property/casualty market cycle. RLI Corp. has been able to maintain modest financial leverage and strong fixed-charge coverage owing to its strong financial flexibility, which has been reflected by the ratings affirmed to it.

However, RLI Corp.'s above average equity leverage, which could result in earnings volatility in more turbulent financial market conditions, partially offset the positives. Nonetheless, A.M. Best believes that RLI Corp. is financially well positioned at its current rating level.

The company could, however, witness a downward rating due to significant deterioration in its underwriting performance as well as a decline in its risk-adjusted capitalization.

Rating affirmations or upgrades from credit rating agencies play an important part in instilling investor confidence in the stock as well as in maintaining its creditworthiness in the market. Currently, RLI Corp. carries a Zacks Rank #3 (Hold).

Better-ranked stocks from the property and casualty insurance sector include Endurance Specialty Holdings Ltd. ENH , Markel Corp. MKL and State Auto Financial Corp. STFC . All of these stocks sport a Zacks Rank #1 (Strong Buy).

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RLI CORP (RLI): Free Stock Analysis Report

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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.


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

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