It has been about a month since the last earnings report for RLI Corp. (RLI). Shares have added about 4.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is RLI Corp. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
RLI's Q4 Earnings Miss on Higher Expenses, Premiums Rise Y/Y
RLI Corp. reported fourth-quarter 2024 operating earnings of 41 cents per share, which missed the Zacks Consensus Estimate by 14.5%. The bottom line decreased 46.8% from the prior-year quarter.
The quarterly results reflect higher premiums and improved investment income, partially offset by higher expenses and poor underwriting income.
Operating revenues for the reported quarter were $436 million, up 15.3% year over year, driven by higher net premiums earned and net investment income. The top line matched the Zacks Consensus Estimate.
Gross premiums written increased 9% year over year to $473.2 million. This uptick can be attributed to the solid performance of the Casualty segment (up 18.3%). Our estimate was $550 million.
Net investment income increased 19% year over year to $38.8 million. The Zacks Consensus Estimate and our estimate for the metric were both pegged at $38.1 million. The investment portfolio’s total return was negative 1.1% in the quarter.
Total expenses rose 29.6% year over year to $379.2 million, primarily due to higher loss and settlement expenses, policy acquisition costs and interest expense on debt. Our estimate was $411.9 million.
Underwriting income of $22.2 million decreased 62.8% year over year. The combined ratio deteriorated 1,170 basis points (bps) year over year to 94.4. The Zacks Consensus Estimate for the metric was pegged at 96, while our estimate was 102.
Operating earnings of $2.87 per share improved 16.2% from the prior-year quarter.
Operating revenues were $1.7 billion million, up 18% year over year. Net premiums earned increased 17.9% to $1.53 billion and were in line with our estimate. Underwriting income increased 21.6% to $210.7 million. Our estimate was $180.5 million. The combined ratio improved 40 bps to 86.2, while our estimate was 88.2.
The investment portfolio’s total return was 6.4%.
RLI exited the quarter with total investments and cash of $4.1 billion, up 11.1% from 2023-end. Book value was $16.59 per share as of Dec. 31, 2024, up 7.1% from the figure as of Dec. 31, 2023.
Net cash flow from operations was $560.2 million, up 21% year over year. The statutory surplus increased 17.6% from 2023-end to $1.8 billion as of Dec. 31, 2024. Return on equity was 21.7%, contracting 640 bps from the year-ago period.
The insurer paid a special dividend of $2.00 per share for the fourth quarter. Shareholder returns totaled $183.5 million. RLI has paid dividends for 194 consecutive quarters and increased regular dividends in each of the last 49 years. Over the last 10 years, the company has returned nearly $1.5 billion to shareholders. The regular dividend has grown an average of 4.9% per year.
It turns out, estimates review flatlined during the past month.
At this time, RLI Corp. has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
RLI Corp. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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