RLI Corp Faces Catastrophe Losses Amid Strong Earnings Outlook

A report highlights RLI Corp.'s estimated catastrophe losses of $35-$40 million from recent hurricanes but also indicates strong year-over-year growth in earnings estimates. Despite losses, the company's history of profitability may cushion stock performance.

Date: 08-10-2024

AI Rating: 6

The report discusses RLI Corp.'s estimated pretax net catastrophe losses, projected between $35-$40 million, due to Hurricanes Beryl and Helene. These losses are to be reflected in their third-quarter results, which is likely to concern investors due to anticipated downward revisions in earnings estimates.

The Zacks Consensus Estimate for RLI's third-quarter earnings shows a strong year-over-year increase of 50.8% to 92 cents. However, the expectation that analysts will adjust estimates downwards could pressure stock prices negatively.

In terms of performance, RLI has maintained an impressive track record, being noted as one of the industry’s most profitable property and casualty (P&C) insurers. The report highlights that RLI has benefitted from continued underwriting profitability, showcasing a combined ratio below 100 for 26 years, with a specific improvement of 270 basis points in the first half of 2024. This reflects strong underwriting discipline and suggests that despite potential losses from catastrophes, the overall financial health remains robust.

The implication of natural catastrophe losses is significant as they create volatility in earnings, but the positive aspect of strong underwriting income growth (35.4% year-over-year to $147.7 million) presents a favorable outlook. Investors might view the company's ability to offset losses with consistent profitability as a stabilizing factor in the fluctuating insurance market.

Stocks: RLI ACGL AXS CINF