RLI Trading at a Premium to Industry: How to Play the Stock

Core Insights - RLI Corp. (RLI) shares are trading at a premium compared to the Zacks Property and Casualty Insurance industry, with a price-to-book value of 3.42X, exceeding the industry average of 1.54X, the Finance sector's 4.37X, and the Zacks S&P 500 Composite's 8.74X [1] - RLI shares have experienced a decline of 13.2% over the past year, contrasting with the industry's return of 6.1% [2] - RLI has a market capitalization of $5.93 billion, with an average trading volume of 0.6 million shares over the last three months [3] Growth Projections - The Zacks Consensus Estimate for RLI's 2025 earnings per share indicates a year-over-year increase of 7.3% [4] - The consensus estimate for revenues in 2025 is projected at $1.77 billion, reflecting a year-over-year improvement of 6.3% [4] - For 2026, the revenue estimate indicates a further increase of 3.4% from the 2025 estimates [4] Financial Performance - RLI's return on equity (ROE) has improved, with a trailing 12 months ROE of 15.8%, significantly higher than the industry average of 7.7% [5] - RLI has maintained a strong track record of underwriting profitability for 29 consecutive years, showcasing its operational strength [9][12] Strategic Factors - RLI is growing through product diversification, focusing on new product introductions, re-underwriting, and business expansion, which positions the company well for improved revenue generation [6] - The company has a conservative underwriting and reserving policy, allowing for favorable reserve releases despite incurring catastrophe losses [6] - RLI has a robust dividend history, having raised regular dividends for 50 years and paid special dividends since 2011, making it attractive for yield-seeking investors [10][12] Balance Sheet and Capital Structure - RLI is strengthening its balance sheet by improving liquidity and leverage, which supports its operations and long-term book value growth [11] - The company’s sound capital structure enhances its ability to meet policyholder interests and drive operational efficiency [11]