RLI Corp's (RLI) Q2 Earnings And Revenues Miss Estimates

RLI Corporation’s (NYSE:RLI) second-quarter 2016 operating earnings of 61 cents per share missed the Zacks Consensus Estimate by 3.2%. The bottom line also deteriorated by 20.8% year over year.

The earnings decline is attributable to a decrease in underwriting income.

Including realized gains of 4 cents, net income plunged 22.6% year over year to 65 cents.

Operational Performance

Operating revenues totaled $193 million, up 4.3% year over year. The top line, however, missed the Zacks Consensus Estimate of $196 million by 1.5%.

Gross premiums written inched up 1% year over year to $250.6 million on strong performances by the Casualty and Surety segments. However, the upside was limited by weakness in the Property segment.

Total expense increased 11.8% year over year to $158.8 million due to higher loss and settlement expenses, policy acquisition costs and general corporate expenses.

Underwriting income of this property and casualty insurer totaled $26 million, down 25% year over year. Underwriting income decreased due to soft income from Casualty and Surety. Combined ratio deteriorated 570 basis points year over year.

RLI Corp.’s net investment income declined 2.9% year over year to $13 million. Total return in the investment portfolio was 2.8%, while bond portfolio retuned 2.4%. Equity portfolio returned 4.4%.

Financial Update

RLI Corp. exited the second quarter with total investments and cash of $2.09 billion, up 7.5% from year-end 2015.

Book value was $20.87 per share as of Jun 30, 2016, up 10.4% from that as of Dec 31, 2015.

Long-term debt was $148 million, flat with 2015-end level.

Statutory surplus increased 6.8% year over year to $924 million.

Dividend Payout

RLI Corp. paid quarterly dividend of 20 cents per share. The insurer has paid more than $641 million over last five years.

We wait to see how the stock fares in the trading session following both earnings and revenue miss.

Zacks Rank and Stocks to Consider

RLI Corp. presently carries a Zacks Rank #3 (Hold). Among the other players from the insurance industry that have reported their second-quarter earnings so far, the bottom line at Brown & Brown Inc.’s (NYSE:BRO) and MGIC Investment Corp. (NYSE:MTG) beat their respective Zacks Consensus Estimates, while Progressive Corp.’s earnings (NYSE:PGR) miss the same.