RLI (RLI) Stock Forecast & Price Target

RLI Corp's positive outlook stems from significant growth in its Excess and Surplus (E&S) casualty division, which reported a 13% increase driven by a 20% rise in submissions, further supported by higher rates in key sectors such as transportation and commercial auto, which rose by 12% and 14%, respectively. Additionally, the surety segment benefited from new agency relationships, increased construction activities, and elevated material costs, contributing to healthy transactional surety growth through leveraged existing relationships. Overall, these developments indicate a robust demand for RLI's specialized insurance products, enhancing the company's revenue potential across its operating segments.

RLI Corp is experiencing significant challenges in its surplus lines commercial property segment, with data indicating an 8% decline in premiums during the third quarter, marking the largest quarterly drop in the current cycle. Additionally, the company's casualty reserve cushion has weakened in recent years, as demonstrated by increased loss development in the 2021-2022 accident years, which suggests potential underlying loss inflation that may impact profitability. This combination of declining premiums and diminished reserve strength raises concerns regarding RLI's ability to sustain growth and effectively manage its risk exposure.