RLI Gains 23.3% in Three Months: What Investors Should Know?

RLI Corp. RLI shares have gained 23.3% over the past three months compared with the industry’s return of 5.2%.

The performance was driven by strong underwriting, higher investment income and premium growth. Shareholder-friendly capital returns also aided the rally. RLI had already announced a special dividend, a dividend hike and a share buyback in May.

Shares of some other industry players like The Travelers Companies, Inc. TRV, W.R. Berkley Corporation WRB and Cincinnati Financial Corporation CINF have gained 20.4%, 2.4% and 2.1%, respectively, over the past three months.

3-Month Price Performance: RLI, TRV, WRB, CINF & Industry

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RLI’s Growth Projection

The Zacks Consensus Estimate for RLI’s 2026 revenues is pegged at $1.86 billion, implying a year-over-year improvement of 4.7%. The consensus estimate for 2026 earnings per share (EPS) indicates a year-over-year decrease of 17%. The consensus estimate for 2027 EPS indicates a decrease of 3.7%, while revenues indicate an increase of 1.7% from the corresponding 2026 estimates.

Optimistic Analyst Sentiment on RLI

The company has witnessed five upward earnings estimate revisions for 2026 over the past 30 days, while 2027 estimates have seen two upward and two downward revisions in the same time frame. Thus, the Zacks Consensus Estimate for 2026 moved 4.7% north, while the 2027 earnings estimate remained unchanged over the same period.

RLI’s Favorable Return on Equity

RLI’s return on equity has also been improving over the last few quarters, reflecting its efficiency in utilizing shareholders’ funds. The trailing 12-month ROE was 17.6%, better than the industry average of 7.5%.

Factors Acting in Favor of RLI

RLI is one of the industry’s most profitable P&C writers and delivered its 30th consecutive year of underwriting profit in 2025. The company generated $59.9 million of underwriting income in the second quarter of 2026 with a 85.6 combined ratio, while the first-half 2026 combined ratio was 85.8.

RLI’s Casualty segment remained a key growth driver. In the second quarter of 2026, gross premiums increased 11% year over year, led by 19% growth in transportation and 26% growth in personal umbrella. Growth was supported by favorable pricing, with rates rising 17% in personal umbrella and 8% in transportation. Reduced competitive activity among some competitors is creating new business opportunities for RLI, allowing it to selectively expand its portfolio while maintaining pricing discipline.

Investment income has been improving over the last several years, primarily driven by higher reinvestment rates and a larger average asset base. Net investment income increased 16% to $88.4 million in the first half of 2026. Fixed-income purchase yields averaged 4.9%, about 60 basis points above the current book yield. Management expects investment income to keep growing if rates hold and the portfolio expands.

This insurer has been enhancing shareholders' value by distributing wealth in the form of dividend hikes, special dividends and share buybacks. It boasts an impressive dividend track record. Over the past five years, the company has returned more than $1.3 billion through dividends and buybacks, while preserving capital for profitable underwriting opportunities. It has paid dividends for 199 consecutive quarters and increased regular dividends in each of the last 51 years, making the stock an attractive pick for yield-seeking investors.

The insurer has been strengthening its balance sheet by improving liquidity and leverage. As of June 30, 2026, total investments and cash reached $4.87 billion, up 4.5% from year-end 2025. A sound capital structure helps it meet the interests of its policyholders, enhance operations in the insurance sector and drive its book value for the long term.

RLI's Premium Valuation

RLI trades at 3X book value versus 1.47 X for the industry. This premium raises sensitivity to softer pricing, catastrophe losses or slower earnings growth.

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Risks for RLI

RLI remains exposed to catastrophe risks, incurring  $26 million in first-half 2026 catastrophe losses. Unpredictable events could raise loss costs, pressure underwriting income, and increase earnings volatility.

RLI faces rising competition in E&S property, with second quarter 2026 property GPW down 6% year over year and renewal retention falling below 70%. Softer hurricane and earthquake pricing could further pressure premium growth and underwriting margins.

End Notes

RLI is one of the industry’s most profitable P&C writers, with an impressive track record of delivering 30 consecutive years of underwriting profitability. A strong local branch office network, a broad range of product offerings, higher investment income and improving liquidity poise the company’s growth. Impressive dividend history, higher returns and optimistic analyst sentiment are other positives. However, catastrophe risks and rising E&S property competition remain risks.

Given its premium valuation, the risk-reward profile appears balanced, making it prudent to wait for a better entry point for this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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