RLI Corp. Forms New Service Group - Analyst Blog

RLI Corp. (RLI) announced the merger of three of its existing products -- design professionals, technology professionals, and target professionals -- to form a new unit named the Professional Services Group. The Professional Services Group will be led by L. Lenny Waldhauser.

This group will offer property, casualty and professional liability solutions to protect against a number of exposures. Also, the group will complement its insurance coverages with risk management and continuing education services.

The bringing together of three of its product offerings under one business group would bolster the company's professional products offering, differentiating it from competition. In this context, the growing number of professional services firms in the fray is creating new opportunities.

During the third quarter, the company witnessed a decline in premiums. The comprehensive offering will likely help the company to write higher premiums going forward.

RLI Corp. reported third-quarter 2010 operating earnings of $1.19 per share, beating the Zacks Consensus Estimate as well as the year-ago results. ACE Limited (ACE), which competes with RLI Corp., posted earnings of $2.01 per share, beating the Zacks Consensus Estimate, but falling short of the year-ago results. Another peer, The Travelers Companies (TRV), also reported earnings that surpassed the Zacks Consensus Estimate as well as the year-earlier figure.

The Zacks Consensus Estimate for fourth-quarter 2010 is $1.00 per share. For full years 2010 and 2011, the Zacks Consensus Estimates are, respectively, $4.62 per share and $3.91 per share.

RLI Corp. continues to benefit from its business expansion drive in order to counter the prevailing soft economic conditions.As a strategy, the company has made forays into crop and other assumed property reinsurance, fueling solid performance at the Property segment. The company also partnered with Embrace Pet Insurance Agency to expand into a new niche market.

However, higher expenses and the lackluster performance at the Casualty segment keep us on the sidelines.

We maintain our Neutral recommendation on RLI Corp over the long term. The quantitative Zacks #3 Rank (short term Hold rating) on the stock indicates no clear directional pressure on the shares over the near term.

Headquartered in Peoria, Illinois, RLI Corp., through its subsidiaries, underwrites property and casualty insurance primarily in the United States.

 
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