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On Thursday, JMP analysts led by Matthew Carletti maintained a Market Perform rating on RLI Corp . (NYSE:RLI), a $7.2 billion market cap insurance company, after the company reported its first-quarter earnings. RLI Corp. announced an operating EPS of $0.92, which surpassed both JMP’s estimate of $0.66 and the consensus estimate of $0.84. The earnings beat was largely attributed to a more favorable Property loss ratio and a lower-than-anticipated Surety loss ratio, which were somewhat counterbalanced by a higher Casualty loss ratio and lower net investment income (NII) than JMP had projected. According to InvestingPro analysis, RLI currently trades slightly above its Fair Value, with a P/E ratio of 20.6x.
The Property loss ratio came in at 25%, significantly lower than the 54% expected by JMP, reflecting fewer catastrophic events and stronger favorable prior period development (PPD (NASDAQ:PPD)). The Surety loss ratio was reported at -4%, compared to the expected 15%, driven by favorable PPD. However, the Casualty loss ratio was higher at 64%, compared to the estimated 60%, due to lower accident year loss ratio while favorable development did not meet expectations. NII for the quarter was $37 million, falling short of the estimated $40 million. InvestingPro data shows RLI maintains strong financial health with an overall score of 3.06 out of 4, and has impressively maintained dividend payments for 50 consecutive years.
Despite these variances, the expense ratio for RLI Corp. stood at 38%, aligning with expectations. The company’s gross written premiums saw a 5% increase in the quarter, which did not meet JMP’s anticipated 10% growth. The Casualty segment displayed the strongest growth at 14%, although this was just below the 15% estimate. On the other hand, Surety and Property segments did not perform as expected, with Surety premiums decreasing by 1% against an anticipated 5% increase, and Property premiums dropping by 6%, contrary to the expected 5% growth. The company’s revenue growth remains solid at 17.1% over the last twelve months, with a return on equity of 24%.
RLI Corp.’s book value as of March 31 was reported at $17.48, slightly above JMP’s forecast of $17.10, and marked a 6% sequential increase. The company’s financial performance in the first quarter demonstrates a mix of results, with certain areas exceeding expectations and others not reaching projected figures. For deeper insights into RLI’s performance and outlook, InvestingPro subscribers can access the comprehensive Pro Research Report, which includes detailed analysis of the company’s financials, valuation metrics, and growth prospects.
In other recent news, RLI Corp reported its fourth-quarter 2024 earnings, revealing a significant miss in earnings per share (EPS) and revenue compared to analyst expectations. The company posted an EPS of $0.41, falling short of the forecasted $1.02, and revenue of $439.12 million, below the anticipated $464.46 million. Despite these shortfalls, RLI Corp achieved a 13% increase in full-year net earnings, reaching $3.74 per share, and maintained its 29th consecutive year of underwriting profit. Gross premiums rose by 9% in the fourth quarter, highlighting the company’s robust performance in its insurance segments.
Looking ahead, RLI Corp expects to maintain its underwriting profitability and has projected its 2025 earnings per share to be $3.10. The company plans to focus on rate increases in auto-related lines and sees potential for organic growth in specialty insurance markets. In terms of analyst perspectives, the company’s stock experienced a downgrade from Oppenheimer, reflecting concerns over the earnings miss and revenue shortfall. The company also addressed its investment strategy in Prime and clarified its approach to potential mergers and acquisitions during the earnings call.
Despite the recent earnings miss, RLI Corp’s leadership emphasized their commitment to profitable growth and maintaining a stable market presence. The company continues to navigate challenges such as auto severity and increasing competition in the excess and surplus (E&S) property market. RLI Corp remains focused on making long-term decisions beneficial to stakeholders, with a continued emphasis on underwriting discipline and financial consistency.
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