On Friday, Jefferies lifted its assessment of RLI Corp. (NYSE:RLI) to Hold from a previous Underperform rating, retaining a price target of $52. The specialty insurance firm, whose stock is currently priced at $57.25, has experienced about a 17% decline over the last twelve months but continues to be profitable, reflected by its price-to-earnings ratio standing at 13.5.
The adjustment in rating is attributable to a substantial reduction in RLI’s valuation multiples. Specifically, its price-to-book ratio has decreased from levels exceeding 4 times a year ago to roughly 2.8 times, as noted by Jefferies analysts. Further validation comes from InvestingPro data, which indicates that the equity is trading close to the 52-week low and appears undervalued when benchmarked against Fair Value calculations. The company also boasts an impressive record of delivering dividends for 50 consecutive years, currently offering a yield of 4.6% to shareholders.
Despite these positives, Jefferies highlights continued headwinds in RLI’s property insurance division due to excessive market capacity. This dynamic exerts downward pressure on premiums and growth prospects, which could adversely affect the combined loss and expense ratios. Meanwhile, InvestingPro’s evaluation rates RLI’s overall financial health as "GOOD," supported by robust cash flows sufficient to meet interest obligations. The firm also points out that RLI’s cautious stance in its casualty insurance segment likely curtails potential for notable growth and margin enhancement.
Nevertheless, Jefferies emphasizes that RLI’s longstanding practice of disciplined underwriting warrants a valuation premium relative to its peers. In addition, the strong surplus capital reserve is projected to underpin shareholder returns in the years 2026 and 2027.
In recent corporate developments, RLI announced its fourth-quarter 2025 earnings, delivering an earnings per share of $0.94, surpassing the expected $0.79 by nearly 19%. However, revenue came in at $463.24 million, slightly below the anticipated $474.66 million. This mixed financial disclosure elicited a varied reaction from market participants, who remain attentive to RLI’s evolving financial results and prospects.