Dividend Kings In Focus: RLI Corp.

Published on July 10th, 2025 by Felix Martinez

The Dividend Kings are a select group of stocks that have increased their dividends for at least 50 consecutive years.

We believe the Dividend Kings are among the highest-quality dividend growth stocks to buy and hold for the long term.

With this in mind, we created a full list of all the Dividend Kings.

You can download the full list, along with important financial metrics such as dividend yields and price-to-earnings ratios, by clicking the link below:

RLI Corp. (RLI) is the newest member of the Dividend King list, having announced its 50th consecutive annual dividend increase on February 13th.

This article will provide an overview of the company’s business, its growth prospects, competitive advantages, and expected returns.

Business Overview

RLI Corp. is an insurance company that operates the following business units: Casualty (healthcare & transportation insurance), Property (fire, earthquake, difference in conditions, marine, etc.), and Surety (contract surety coverage, licenses, and bonds).

Source: Investor Presentation

RLI Corp reported Q1 2025 net earnings of $63.2 million, or $0.68 per diluted share, down from $127.9 million, or $1.39 per share, in Q1 2024, primarily due to a $42.3 million unrealized loss on equity securities. Operating earnings were $84.9 million, or $0.92 per share, slightly lower than $87.4 million, or $0.95 per share, in Q1 2024. Gross premiums written grew 5% to $491.1 million, driven by the casualty segment, while net investment income rose 12% to $36.7 million. The company achieved a combined ratio of 82.3, with underwriting income of $70.5 million, supported by $27.4 million in favorable prior-year reserve development. RLI reaffirmed its focus on profitability but did not provide specific full-year 2025 guidance in the release.

Segment performance varied, with the property segment posting $56.9 million in underwriting income (a combined ratio of 57.1%), the surety segment contributing $11.5 million (a combined ratio of 68.5%), and the casualty segment generating $2.1 million (a combined ratio of 99.1%). Comprehensive earnings were $93.2 million, or $1.01 per share, reflecting after-tax unrealized gains from the fixed income portfolio due to declining interest rates. Book value per share increased 6% to $17.48 from year-end 2024, and RLI paid a quarterly dividend of $0.15 per share, up 3.4%, continuing its 50-year streak of dividend increases. All per-share data reflect a two-for-one stock split on January 15, 2025.

The company maintained a strong financial position, with total assets of $5.73 billion, up 1.8% from December 31, 2024, and shareholders’ equity of $1.60 billion, a 5.4% increase. Cash flow from operations surged 45.9% to $103.5 million, driven by strong premium growth. RLI’s investment portfolio yielded a 1.3% total return, with fixed income assets at $3.27 billion and equity securities at $725.9 million. The company’s A+ (Superior) financial strength rating was reaffirmed by AM Best, underscoring the resilience of its diversified specialty insurance portfolio and commitment to shareholder value.

RLI Corp is forecasted to see its earnings per share grow nicely this year, to $3.05 per share.

Growth Prospects

RLI Corp. has not consistently grown its profits in the past, as profits remained relatively stable for much of the last decade.

This is, in large part, because low interest rates reduced the income RLI can generate with its insurance float at times.

Since 2020, however, RLI Corp. has grown its earnings per share very nicely, with earnings per share rising by more than 100% between 2020 and 2024.

Higher interest rates enable RLI Corp. to deploy its insurance float in a more profitable manner; thus, a higher-rate environment is beneficial for the company, all else being equal.

Source: Investor Presentation

RLI has grown its premiums in recent years, and with further premium growth, RLI is expected to see its sales increase in the future.

We believe that a 3% annual earnings-per-share growth rate is a realistic long-term estimate, taking into account recent performance and the longer-term track record.

Competitive Advantages & Recession Performance

Many financial corporations, including some insurers, experienced significant difficulty during the Great Recession.

RLI remained profitable, and its earnings per share actually grew during the 2008-2010 time frame. We believe that RLI Corporation will be relatively stable during future recessions as well.

RLI Corporation has steadily increased its regular dividend over the years, a trend made possible by ongoing increases in the company’s payout ratio.

More recently, the dividend payout ratio has decreased again, and the dividend appears to be very sustainable for now.

During the Great Recession of 2008-2009, it steadily grew earnings-per-share each year during that time:

2008 earnings-per-share of $3.60
2009 earnings-per-share of $4.32 (20% increase)
2010 earnings-per-share of $6.00 (39% increase)

Valuation & Expected Total Returns

Based on expected 2025 earnings-per-share of $3.05, RLI stock trades for a forward P/E of 22.9. This is above our fair value estimate of 19, meaning shares appear overvalued.

RLI Corporation’s price-to-earnings multiple has fluctuated widely in the past. Shares were valued at a low double-digit price-to-earnings multiple shortly after the Great Recession; however, the company’s valuation multiple has since increased significantly.

RLI’s valuation remains elevated. We believe that shares are trading above their fair value and that multiple compression is likely to occur going forward.

For example, if the P/E multiple declines from 22.9 to 19 over the next five years, it would reduce shareholder returns by -2.5% per year over that time frame.

Aside from changes in the P/E multiple, RLI should also generate returns from earnings growth and dividends. A projection of expected returns is below:

3% earnings-per-share growth
0.9% dividend yield
-2.5% multiple reversion

RLI pays a regular quarterly dividend and occasionally issues special dividends. For example, the company paid shareholders a special dividend of $4.00 per share in 2024 and a $2.00 special dividend in 2023.

However, since special dividends are irregular, we exclude them from our analysis and instead focus on the regular quarterly payouts.

In this scenario, RLI stock is projected to generate a negative total return of 1.4% per year over the next five years.

Final Thoughts

RLI Corporation is an insurance company that has generated solid operating results in recent years, with written premiums and investment income increasing at a steady pace.

Earnings are expected to continue growing over the next couple of years, albeit at a moderate pace.

RLI Corporation does not have a strong long-term track record, despite strong results in recent years, and the outlook for 2025 is also compelling.

However, we believe that shares are overvalued today. Due to this, RLI Corporation earns a “Hold” recommendation from Sure Dividend at its current valuation level.