RLI Lags Industry, Trades at Premium: How to Play the Stock

Core Insights - RLI Corp. shares have decreased by 9.6% over the past year, underperforming compared to the Finance sector and the S&P 500, which returned 16% and 14.3% respectively [1] - The stock is currently trading at $68.40, approximately 25% below its 52-week high of $91.14, and below both the 50-day and 200-day simple moving averages [1] Valuation - RLI's forward 12-month price-to-book ratio stands at 3.62X, significantly higher than the industry average of 1.53X [2] Growth Projections - The Zacks Consensus Estimate projects a 7.3% year-over-year increase in RLI's earnings per share for 2025, with revenues expected to reach $1.77 billion, reflecting a 6.3% improvement [3] - For 2026, revenue estimates indicate a further increase of 3.4% compared to 2025 [3] Return on Capital - RLI's return on equity (ROE) has improved to 15.8%, well above the industry average of 7.6%, indicating effective utilization of shareholders' funds [4] Price Target and Upside Potential - The average price target for RLI, based on short-term estimates from three analysts, is $74 per share, suggesting an 8.9% upside from the last closing price [5] Business Strengths - RLI has maintained 29 consecutive years of underwriting profitability, showcasing its operational strength [7][10] - The company has a strong dividend history, having raised regular dividends for 50 years and paid special dividends since 2011, making it appealing to yield-seeking investors [11] Strategic Initiatives - RLI is focused on product diversification, introducing new products, and expanding distribution, which positions the company for improved top-line growth [9] - A conservative underwriting and reserving policy allows RLI to achieve favorable reserve releases despite incurring catastrophe losses [10] Financial Health - RLI is enhancing its balance sheet by improving liquidity and leverage, which supports its long-term operational capabilities and book value growth [12] Conclusion - RLI is recognized as one of the most profitable property and casualty writers in the industry, with a strong local branch network and a focus on specialty insurance lines contributing to its profitability [13]