RLI (RLI) Stock Forecast & Price Target

RLI Corp's positive outlook is supported by significant growth in its Excess and Surplus (E&S) casualty division, which experienced a 13% increase in the period attributed to a 20% rise in submissions, driven by enhanced engagement with wholesale distribution. Furthermore, the Surety segment has shown promise with new agency relationships and increasing demand from new construction projects, alongside elevated material costs that support increased premiums. The company’s focus on specialized markets, notably in transportation and commercial auto with rate increases of 12% and 14% respectively, positions it favorably for continued revenue growth and enhanced profitability.

RLI Corp has experienced a notable decline in gross written premiums, down 2% in the recent quarter, which is a significant deviation from earlier projections of a 2% increase, driven primarily by an 11% drop in the Property segment and further deterioration indicated by an 8% decrease in surplus lines commercial property premiums. This decline in top-line growth highlights challenges within all three segments—Casualty, Property, and Surety—further exacerbating concerns about the company's casualty reserve cushion, which appears to have weakened due to increased loss development from the 2021-2022 accident years, forecasting potential underlying loss inflation. Furthermore, the Excess & Surplus market, crucial for RLI's operations, has shown drastic downturns in premium per policy, particularly in states like Florida, which recorded a 46% decline in the third quarter, suggesting a broader trend of decreasing profitability within RLI's key business lines.