Yesterday, RLI Corp.’s (RLI) ratings were upgraded by Fitch Ratings. The rating agency raised the holding company’s ratings including the senior debt rating to ‘BBB+’ from ‘BBB’ and the Insurer Financial Strength (IFS) ratings of its operating subsidiaries to ‘A+’ from ‘A’. The rating outlook is stable.
The ratings upgrade reflects RLI’s continued strong operating performance in a competitive insurance market and a weak economy. Besides, the upgrade also reflects the company’s solid capitalization and a strong balance sheet.
Fitch has recognized the company’s prudent underwriting discipline throughout the pricing cycle. The company has achieved 14 consecutive years of underwriting profitability through 2009. In 2009, statutory capital levels improved 16% while its equity increased 18%, reflecting strong earnings performance and a rebound in the financial market. Additionally, its investment portfolio is of a high quality.
However, though the company is expected to generate underwriting profit, Fitch forecasts that the underwriting results may weaken in 2010 due to persistent market softness and the likelihood of reduced benefits from favorable reserve development.
Additionally, RLI’s size and limited resources compared to its peers and its exposure to catastrophes are factors offsetting the ratings.
RLI reported a fourth quarter earnings of $1.17 per share, well ahead of the Zacks Consensus Estimate of 97 cents. Results reflected improved underwriting results and favorable reserve development from the prior year’s loss reserves.
However, premium writings remain curtailed, reflecting the continued soft environment in the Casualty segment. Also, the significant decrease in construction activity has affected the general liability business.
Read the full analyst report on “RLI”
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