RLI

RLI Corp.

Finance/Real Estate


Presented:04/29/2020
Price:$71.25
Cap:$3.20B
Current Price:$160.24
Cap:$7.33B

Presented

Date04/29/2020
Price$71.25
Market Cap$3.20B
Ent Value$4.12B
P/E Ratio50.2x
Book Value$20.38
Div Yield1.29%
Shares O/S44.92M
Ave Daily Vol303,485
Short Int6.86%

Current

Price$160.24
Market Cap$7.33B
RLI Corp. operates as a holding company, which engages in the provision of insurance and underwriting services. It operates through the following segments: Casualty, Property and Surety. The Casualty segment offers healthcare and transportation insurance. The Property segment consists of commercial fire, earthquake, difference in conditions, marine, facultative and treaty reinsurance, including crop and select personal lines policies, including pet insurance and homeowners reinsurance services. The Surety segment engages in writing contract surety coverage, licenses and bonds for commercial, energy and industrial sectors. The company was founded by Gerald D. Stephens in 1965 and is headquartered in Peoria, IL.

Publicly traded companies mentioned herein: RLI Corp (RLI) 

Highlights

The presenter is short shares of RLI, as he believes the company’s rich valuation has been inflated in the past few years not only due to its niche insurance offerings and reputation of competence, but also from accumulation by passive funds with mandates targeting dividends, as the company began returning most of its earnings to shareholders through special dividends. He has two downside scenarios, one anticipating large losses from its niche excess & surplus (E&S) insurance business, and the other anticipating a spike in claims in its surety business, which is traditionally very cyclical. If neither of these scenarios materialize, our presenter is comfortable with the risk to return ratio on the short side, as the company has not been growing at a fast rate and is already priced at a large premium to its peers.

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Idea Discussion

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