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RLI Corp Growth Prospects Bright Despite Higher Expenses

On May 11, 2016, we issued an updated research report on RLI Corp. RLI.

In the first quarter of 2016, the insurer’s earnings outperformed the Zacks Consensus Estimate and also improved year over year. RLI Corp. witnessed a rise in gross written premiums in the reported quarter owing to better performances at the Casualty and Surety segments.

We expect the company to sustain its growth momentum on the back of its diversified portfolio and operational strength. Also, the company displayed superior underwriting discipline by maintaining its combined ratio at favorable levels.

RLI Corp remains committed towards enhancing its shareholders value and thus has increased dividends over the past 41 years. With the latest hike of 5.3% approved this May, the company’s dividend now becomes 20 cents per share. Notably, RLI Corp. has paid more than $638 million over the last five years in dividend. Its current dividend yield is 1.20%.

The property and casualty (P&C) insurer boasts robust capital structure which enables it to cater to its policyholders, enhance operations in the insurance sector and grow its book value for the long term. Also, the asset turnover ratio, for the trailing 12 months is much better than the industry average .

In addition, RLI Corp. also has a return on equity of 13.9% better than the industry average of 7.38%. Moreover, low financial leverage provides significant financial flexibility to the operating subsidiaries.

However, exposure to a low interest rate environment had a negative impact on the net investment income of the company. Moreover, escalating expenses continue to raise caution as such expenses tend to weigh on operating margin expansion.

Zacks Rank and Stocks to Consider

Currently RLI Corp. carries a Zacks Rank #3 (Hold). Some better-ranked stocks are Cincinnati Financial Corp. CINF, Markel Corp. MKL and NMI Holdings, Inc. NMIH. Each of these stocks sports a Zacks Rank #1 (Strong Buy).

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RLI CORP (RLI): Free Stock Analysis Report
 
CINCINNATI FINL (CINF): Free Stock Analysis Report
 
MARKEL CORP (MKL): Free Stock Analysis Report
 
NMI HOLDINGS-A (NMIH): Free Stock Analysis Report
 
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