RLI drops to two-month low on strong volume 02 December 2019

NEWS BITES - NORTH AMERICA

RLI Corp. (NYSE:RLI), the NYSE's 37th largest Insurance company by market cap, traded at its 47-day low of $US89.42. RLI's stock price has decreased 4.0c (0.04%) from its previous trading session to close at $US91.33. Compared with the S&P 500 Index which fell 27.1 points (0.9%) in the day, the relative price increase was 0.8%. The fall was exacerbated by strong volume of 3.4 times the average daily volume of 142,690 shares. There were 490,900 shares worth $US44.8 million traded today. Today the stock traded between its three-day high of $US92.48 and 47-day low of $US89.42.

RLI DIVIDENDS

The shares tumbled 7.6% in the 2 trading sessions since the ex-dividend date of November 27. The company paid a dividend of 23.0c per share. Based on dividends of $US3.13 per share for the trailing twelve months and the last price of $US91.33 the dividend yield is 3.4%.

Stock Summary

Today's close (USD)91.33
52-Week Range (USD)63.2-99.2
SectorInsurance sector
Shares Outstanding44,836,000
Market Cap$US4.1 billion

Highlights in today's Report:

SECTION 1 TODAY'S BEARISH SIGNALS

SECTION 2 TODAY'S BULLISH SIGNALS

RECAP FROM PREVIOUS REPORTS (UPDATED AT THE LAST PRICE OF $US91.33):

SECTION 3 THE PAST WEEK

SECTION 4 ONGOING BULLISH PARAMETERS

SECTION 5 ONGOING BEARISH PARAMETERS

SECTION 6 REPORTED BUYING AND SELLING

SECTION 7 SUMMARY FINANCIALS

SECTION 8 CORPORATE PROFILE

SECTION 1 RLI BEARISH SIGNALS

1.1 Overvaluation [compared with sector average]:

Price/Earnings

+ Price/Earnings of 34.6 [15.1].

Price to Book

+ Price to Book of 5.4 [1.4].

1.2 Overvaluation Indicators and rank of RLI in the NYSE market:

DescriptionValueRank In Market
P/E * P/NTA188.17In Bottom Quartile
Price/Earnings34.6In Bottom Quartile

1.3 Downtrend:

Price/Moving Average Price:

+ The Price/MAP of 1.08 for RLI is lower than the Price/MAP for the S&P 500 Index of 1.09.

+ The price to 50-day EMAP ratio is 1.0. The 50-day EMAP has decreased to $US94.10. A decrease is a bearish indicator.

Past Week:

+ RLI Corp. is placed 2596/2702 in BuySellSignals' ranking of NYSE performers in the past week, a percentile ranking of 4.

+ In the past week, volume was 2.2 times average and the shares were down 5.9%. Monday's close price is at a 1.9% discount to its 5-day Volume Weighted Average Price (VWAP) of $US93.06.

Past Month:

+ The price sank 4.9% in the past month. The fall was on volume of 1.1 times average for month.

+ The present value of $US1,000 (PV1000) invested one month ago in RLI is $US963, comprising a capital loss of $US49 and dividend reinvested of $US12.

Slipping Relative Strength (1mo, 3 mo):

+ In the NYSE market of 1,863 stocks and 283 units traded today, the stock has a 6-month relative strength of 56 which means it has outperformed 56% of the market.

+ Also, the relative strength percentile is slipping at 36 for 3 months and 17 for 1 month.

1.4 Low Price Performance Indicator and rank of RLI in the NYSE market:

DescriptionRLI ValueRank In Market
Volatility %3.4In Bottom Quartile

SECTION 2 RLI BULLISH SIGNALS

2.1 Undervaluation [compared with sector average]:

Earnings Yield

+ Earnings yield of 2.9% is 1.6 times the 10-year bond yield of 1.77%.

Dividend Yield

+ To quote Benjamin Graham: "A dividend yield of at least two-thirds the triple-A bond yield"; the stock's dividend yield is 1.9 times the triple-A bond yield of 1.8%.

+ The relative yield of RLI, defined by its yield of 3.4%, divided by average yield of dividend yielding stocks in the S&P 500 Index of 1.6% is 210.4%. This suggests RLI stock is undervalued in dividend yield terms.

MCap/Total Assets

+ Tobin's Q Ratio, defined as MCap divided by Total Assets, is 1.3. Compared with the rest of the market the stock is undervalued.

2.2 Uptrend:

Price/Moving Average Price and MACD:

+ The Moving Average Convergence Divergence (MACD) indicator of 12-day Exponential Moving Average (EMA) of 95.39 minus the 26-day EMA of 95.26 is positive suggesting a bullish signal.

+ The price to 200-day MAP ratio is 1.08, a bullish indicator. In the past 200 days this ratio has exceeded 1.08 156 times suggesting further upside. The 50-day MAP of $US93.89 is higher than the 200-day MAP of $US84.74, a bullish indicator. The 200-day MAP has increased to $US84.74. An increase is another bullish indicator.

2.3 Oversold/Bullish/Support Signals:

+ At $US91.33 the price is below the lower Bollinger band support of $US91.96, indicating an upside for it to return to the band.

+ The stock is oversold according to the Williams % R indicator of -80.5, suggesting the price is close to its 14-day low of $US89.42.

RECAP FROM PREVIOUS REPORTS (UPDATED AT THE LAST PRICE OF $US91.33):

SECTION 3 THE PAST WEEK

3.1 Snapshot: RLI stock was down $US5.78 or 5.9% in the past week. Volume in the week was 2.5 times average trading of 570,760 shares. It outperformed the S&P 500 index in 3 out of 5 days.

DayRLIClose price [USD]Price change %Relative change %Comment
FridayLoses $US332.7 million in MCap, steepest heavyweight fall in Insurance sector91.37-7.5-7.1Steepest Fall; VI*=5.2
WednesdayHits year-high 10th time in three months98.790.40.03Price rise on rising relative strength
TuesdayIncreases strengthening above moving average price98.351.31.1Top Rise
MondayIncreases 1.0% on average volume97.111.00.3Price/PMAP200 above 1 and rising
FridayIncreases96.110.1-0.1Price/PMAP200 above 1 and rising

[Volume Index (VI); 1 is average]

3.2 Corporate Wires: RLI (RLI) issued two Releases in the past week.

November 26: RLI announces dividend

RLI today announced a special dividend of $US1.0 per share. The ex dividend date is Wednesday, November 27.

November 26: RLI announces dividend

RLI today announced a quarterly dividend of 23.0c per share. The ex dividend date is Wednesday, November 27.

3.3 PEOPLE'S NEWS:

November 30 RLI Director John T. Baily's value of investment increases by $3.6 million in November

RLI (NYSE:RLI) Director John T. Baily holds 76,240 shares worth US$7 million at the last price of US$91.4, a rise in value by US$3.6 million (5.2%). A month ago John T. Baily held the same number of shares.

November 30 RLI Senior Vice President Thomas L. Brown's value of investment decreases by $253,754 in November

RLI (NYSE:RLI) Senior Vice President Thomas L. Brown holds 73,337 shares worth US$6.7 million at the last price of US$91.4, a fall in value by US$253,754 (3.6%). A month ago Thomas L. Brown held the same number of shares.

November 28 RLI CEO Jonathan E. Michael's value of investment increases by $11.3 million in the past quarter

RLI (NYSE:RLI) CEO Jonathan E. Michael held 1,219,908 shares three months ago and the price was US$89.25. Jonathan E. Michael now holds 1,216,615 shares worth US$120.2 million at the last price of US$98.79, a rise in value by US$11.3 million (10.4%).

3.4 Volatility:

+ RLI is at a discount of 8.0% to its 12-month high of $US99.24 on November 27. It is also at a premium of 44.6% to the 12-month low of $US63.16 on December 26, 2018.

SECTION 4 ONGOING BULLISH PARAMETERS

4.1 Performance:

+ Return on Equity 8.0% [5.9%].

+ Return on Assets 2.1% [1.5%].

+ Return on Capital Employed 2.2% [1.3%].

+ Net profit margin has averaged 12.1% in the last 3 years. This is better than the sector average of 9.8% and suggests a high margin of safety.

+ As per the Du Pont analysis, Return on Equity [ROE] is less than stellar at 8.0%. ROE is computed as net profit margin of 8.1% times asset turnover [sales/assets] of 0.26 times leverage factor [total assets/shareholders' equity] of 3.8.

4.2 Growth:

Quarterly Trend in Revenue, Net Profit and Net Profit Margin:

+ Net Profit growth has shown signs of recovery in recent quarters. [All figures in %]

Qtr-endedRevenue GrowthNet Profit GrowthNet Profit Margin
Sep 19 [Q3]-0.517.815.3
Jun 19 [Q2]-9.7-57.319.5

+ Over the last 3 years average annual compound growth rate of earnings per share was 18.4%. This is considered moderate.

4.3 Moving Annual Return (Past 5 years)

Based on a dynamic start date of 5 years ago, the real rate of return has averaged 22.1%. The Moving Annual Return has consistently exceeded 7%.

RLIClose (USD)Dividends (USD)Capital Gain %% YieldAnnual Return %
Dec 0291.333.13234.227.2
1 Yr ago74.261.8726.53.229.7
2 Yrs ago58.714.783.18.411.4
3 Yrs ago56.972.692.64.97.4
4 Yrs ago55.540.5433.41.334.7

Close 5 years ago $US41.64

4.4 Increased ADVT past five years

Avg. Daily Volume Traded 12 months ended Dec 02, thousand shares

YearADVT
2019142.7
2018148.7
2017158.6
2016187.4
2015125.6

In the past five years, Average Daily Volume of Trading (ADVT) has increased 13.6% to 142,690 shares.

4.5 Increased VWAP

Past five years, 12 months ended Dec 02 (USD)

YearHigh PriceVWAPLow Price
201999.2481.0363.16
201878.3466.0255.42
201760.3354.5247.43
201665.2457.9149.62
201557.5447.8839.94

In the past five years Volume Weighted Average Price (VWAP) has increased by 69.2% to $US81.03.

4.6 Increased Average Daily Turnover

Past five years, 12 months ended Dec 02 (USD million)

YearAverage Daily Turnover
201911.5
20189.9
20178.7
201611.3
20156.3

In the past five years, average daily share turnover has increased 84.2% to $US11.5 million. This suggests increased liquidity.

4.7 Turnover Rate & Turnover Period:

+ The turnover rate in the 12 months to date was 71.7% (or a turnover period of 1 year 4 months). The average length of ownership of the stock is 2.0 times the average holding period of 8 months for stocks in the S&P 500 Index suggests a larger number of core investors, making a long-term investment safer.

SECTION 5 ONGOING BEARISH PARAMETERS

5.1 Growth:

Annual Trend in Revenue, EPS and EBITDA:

+ Earnings per share growth rate has been negative in recent years. [Year ended, all figures in %]

YearRevenue GrowthEPS GrowthEBITDA Growth
Dec 182.6-39.3-20.1
Dec 17-3.6-9.1-48.6

5.2 High Debt Indicators:

+ Total Liabilities/EBITDA of 34 compares unfavourably with the Joseph Piotroski benchmark of 5.

5.3 Past 5 years Annual EPS growth:

Annual ReportEPS ($US)Growth %
20181.45-39.3
20172.39-9.1
20162.63-17.3
20153.186.2
20143.096.6

Average Annual Compounded rate of growth in EPS for the 5 years was -12.4%. There have been two rises and three declines in the past 5 years.

5.4 Increase in Insider Selling

In the past 5 years a total of 167,803 RLI shares worth $US11.6 million were sold by insiders. Based on a dynamic start date of 5 years ago, insider selling has averaged 33,561 shares per year. In the past year, insiders sold 60,843 shares, an increase of 78.7% from the previous year.

SECTION 6 RLI REPORTED BUYING AND SELLING

6.1 Institutional Buying and Selling Quarter Ended September 30

Total reported Institutional buying = 582,964 shares

Total reported Institutional selling = 860,000 shares

Net reported institutional selling = 277,036 shares

6.2 Reported Holdings of Institutions as at Sep 30, 2019

Total = 33,742,341 shares

Market Value = $US3.1 billion

Institutions hold 75.3% of Issued Shares.

SECTION 7 RLI SUMMARY FINANCIALS

7.1 Dividend History

Trailing 12 months dividend for the 12 months ended December 02 has improved from 54.26c in 2015 to $US3.13 in 2019; there were 1 decline in the past 5 years. Dividends were up 67.4% for the 12 months ended December 02 from $US1.87 in 2018 to $US3.13 in 2019.

7.2 Financials Summary

Year endedDec 2018Dec 2017Dec 2016
Sales (USD M)818.1797.2827.2
Pretax (USD M)67.684.6157.1
Net (USD M)64.2105114.9
EPS (USD)1.452.392.63

+ Net profit was down 38.9% from US$105 million in 2017 to US$64.2 million in 2018.

+ Earnings Per Share (EPS) was down 39.3% from $US2.39 to $US1.45.

7.3 Quarterly Report: Key Parameters

Quarterly Report Analysis Q3 2019: RLI EPS drops 21%


Release Date: October 24, 2019

RLI (NYSE:RLI), announced EPS of 72.0c for the quarter-ended 30 September 2019 [Q3/2019], down 20.9% sequentially from 91.0c in the previous quarter [Q2/2019].

Quarter-ended30 Sep [Q3/2019]30 Jun [Q2/2019]31 Mar [Q1/2019]
EPS72.0c91.0c$US1.47
Sequential growth in EPS %-20.88-38.1-
Revenue$US237m$US238m$US264m
Sequential growth in Revenue %-0.51-9.7453.14
Net Profit$US47.7m$US40.5m$US94.8m
Sequential growth in Net Profit %17.79-57.3-

Compared with the previous corresponding period [PCP; Q3/2018], year-over-year [y.o.y.] EPS was down 19.1%, Revenue was down 1.5% and Net Profit was up 50.5%.

Quarter-ended30 Sep [Q3/2019]30 Sep [Q3/2018]
EPS72.0c89.0c
PCP growth in EPS %-19.12,125.0
Revenue$US237m$US241m
PCP growth in Revenue %-1.55-
Net Profit$US47.7m$US31.7m
PCP growth in Net Profit %50.481,726.76

Major changes compared with previous corresponding period [Year-on-Year]:

Favourable Changes:

- Net profit up 50.5% from $US31.7m to $US47.7m

- Profit after tax to Sales up from 15.8% to 22.6%

Unfavourable Changes:

- Profit before tax to Sales down from 23.1% to 18.4%

- EBIT to Sales down from 23.1% to 18.4%

Note:

- Total revenue steady at $US236.9m

- Tax expenses to Sales down from 3.5% to 3.1%

7.4 Annual Report: Key Parameters

FY2018 Annual Report: RLI profits hit by 38.9% fall


Release Date: February 25, 2019

RLI (NYSE:RLI) reported net profit for the year-ended 31 December 2018 of $US64.2m, down 38.9% from $US105m in the previous year. Earnings per share (EPS) were down 39.3% from $US2.39 in FY2017 to $US1.45 in FY2018.

Major changes compared with previous year:

Favourable Changes:

- Total revenue up 2.6% from $US797.2m to $US818.1m

- Current ratio up 5.2% from 38.0 to 40.0

- Current Debtors to Total Assets up from 14.8% to 16.7%

Unfavourable Changes:

- Net profit slumps 38.9% from $US105.0m to $US64.2m

- EPS slumps 39.3% from $US2.39 to $US1.45

- EBIT Margin down from 11.5% to 8.5%

- EBIT to total assets down from 2.9% to 2.2%

- Profit before tax to Sales down from 11.5% to 8.5%

- Retained earnings to total assets down from 32.1% to 28.8%

- Total non-current assets to Total Assets down from 7.4% to 7.2%

- Total Liabilities to EBITDA of 34.0 compares unfavourably with the Joseph Piotroski benchmark of <5. This ratio has deteriorated by 37.4% from the previous year's ratio of 24.8.

- Net tangible assets per share down 6% from $US17.85 to $US16.78

Note:

- Total revenue to total assets steady at 0.3

- Sales and marketing expenses to Sales down from 34.2% to 33.8%

- Total liabilities to Total assets steady at 0.7

- Working capital to total assets steady at 90.5%

- Total current assets to Total Assets up from 92.6% to 92.8%

- Short-term investments to Total Assets down from 14.4% to 11.8%

- Long-term investments to Total Assets steady at 3.1%

Annual Report [Year-on-year comparison: 2018 vs 2017]

Company Name : RLI Corp. (RLI)
December 3120182017Change
Description$US m$US m(%)
Sales Revenue791.4737.9Up 7.2
Total Revenue818.1797.2Up 2.6
EBITDA67.684.6Down 20.1
EBIT67.684.6Down 20.1
Pre-Tax Profit/(Loss)67.684.6Down 20.1
Profit/(Loss) after Tax64.2105Slumps 38.9
Working Capital2,809.82,656.1Up 5.8
Current Assets2,881.92,727.9Up 5.6
Current Liabilities72.171.8Up 0.4
Shareholders' Funds806.8853.6Down 5.5
Total Liabilities2,298.22,093.6Up 9.8
Total Assets3,105.12,947.2Up 5.4
Cash and cash equivalents30.124.3Up 24.2
Operating Cash Flow217.1197.5Up 9.9
Net Assets806.8853.6Down 5.5
Net Tangible Assets752.3794.3Down 5.3
AuditorKPMG LLP 

Year-on-year comparison of Per Share figures

December 3120182017Change (%)
Description$US $US
Sales17.816.8Up 6.5
EBIT152.4c192.1 cDown 20.7
EBITDA152.4c192.1 cDown 20.7
Cash8.810.1Down 12.6
Working Capital63.360.3Up 5
Shareholders' Funds18.219.4Down 6.2
Total Liabilities51.847.5Up 9
Total Assets7066.9Up 4.6
Net Tangible Assets16.817.9Down 6
EPS Final145c2.4Slumps 39.3
    EPS Dilution Factor *0.99  

* EPS Dilution Factor = Net Profit change / EPS change

Year-on-year comparison of Performance Ratios

December 3120182017Change (%)
Return on Assets (%)2.13.6Down 41.7
Total Liabilities to EBITDA3424.8Up 37.4
Total Liabilities/Total Assets (Up 4.2% from 0.71 to 0.74)0.70.7Up 4.2
Current Ratio4038Up 5.2
Common Size Ratios by Assets %
Total current assets to Total Assets 92.8 92.6 Up 0.3
Current Debtors to Total Assets 16.7 14.8 Up 12.8
Short-term investments to Total Assets 11.8 14.4 Down 18.3
Total non-current assets to Total Assets 7.2 7.4 Down 3.2
Long-term investments to Total Assets 3.1 3.1 Up 1.4
Common Size Ratios by Sales %
Sales and marketing expenses to Sales 33.8 34.2 Down 1.2
Profit before tax to Sales 8.5 11.5 Down 25.8
Tax expenses to Sales 0.9 (5.5) Up 116.2

Five-year record of growth and performance:

In the last 5 years Total Revenue averaged $US802.5M, EBITDA averaged $US144.5M and Net Profit averaged $US111.4M. Compound Annual Growth Rate (CAGR) averaged 3.6% for Total Revenue, -12.7% for Net Profit and -18.5% for EBITDA.

DescriptionAnnual ($US M)5-year Avg ($US M)5-year CAGR %
Total Revenue818.1802.53.6
EBITDA67.6144.5(18.5)
Operating Profit67.6143.5(18.1)
Net Profit64.2111.4(12.7)

Five-year record of EBITDA, Operating Profit, Net Profit, ROE and ROA

In 2018 Net Profit Margin of 8.1% was below its 5-year Avg of 14.4% (All Figures in %)

Description20185-year Avg
EBITDA Margin8.518.6
Operating Profit Margin8.518.5
Net Profit Margin8.114.4
Return on Equity813.4
Return on Assets2.13.9

SECTION 8 CORPORATE PROFILE

8.1 Activities

RLI Corp. underwrites selected property and casualty insurance through major subsidiaries collectively known as RLI Insurance Group. The Company conducts operations principally through three insurance companies. RLI Insurance Company, its principal subsidiary, writes multiple lines insurance on an admitted basis in all 50 states, the District of Columbia and Puerto Rico. Mt. Hawley Insurance Company, a subsidiary of RLI Insurance Company, writes surplus lines insurance in all 50 states, the District of Columbia, Puerto Rico, the Virgin Islands and Guam. RLI Indemnity Company, a subsidiary of Mt. Hawley Insurance Company, has authority to write multiple lines of insurance on an admitted basis in 49 states and the District of Columbia. The Company's segments include casualty, property and surety.

8.2 Issued Capital and MCap

Based on 44,836,000 issued shares the market capitalisation is $US4.1 billion.

8.3 Vanguard Total World Stock ETF 7627:

The stock was one of 7627 global stocks selected by Vanguard Total World Stock ETF (VT). As at Aug 31, 2019, the Vanguard Total World Stock ETF held 13,300 shares worth $US1,208,155 or 0.01% by value of the ETF's portfolio [Ranked 1905 out of 7627 by value and 593 out of 1066 for NYSE].

COMPANY IDENTIFIERS

Contact: +1 309 692-1000

Physical Address: 9025 North Lindbergh Drive, Peoria, IL,61615

State/Province/Country: IL [IL], United States

Country of Incorporation: United States

Industry [NAICS]: 524126

Exchange: New York Stock Exchange

Business Sector: Insurance

Industry Group: Insurance

Economic Sector: Financials

ISIN: US7496071074

N:RLI; RLI.N

PermID: 4295904794

RIC: RLI.N

CIK: 84246

CUSIP: 749607107

Rli Corp

Source: www.BuySellSignals.com