AM Best Affirms Credit Ratings of RLI Corp. and Its Subsidiaries

Rhea-AI Summary

AM Best affirms A+ (Superior) FSR and 'aa' (Superior) Long-Term ICR for RLI Group (RLI) and Long-Term ICR of 'a' (Excellent) for RLI Corp. [NYSE: RLI]. Stable outlook. Strong balance sheet, operating performance, and enterprise risk management. Headquartered in Peoria, IL.

Positive

• Affirmed A+ (Superior) FSR and 'aa' (Superior) Long-Term ICR for RLI Group (RLI)
• Affirmed Long-Term ICR of 'a' (Excellent) for RLI Corp. [NYSE: RLI]
• Stable outlook for the ratings
• Strong balance sheet strength and risk-adjusted capitalization
• Favorable reserve development trends, strong liquidity, and prudent asset liability management practices
• Sound pricing discipline, risk optimization, and solid investment returns
• Strong financial flexibility and modest financial leverage for RLI Corp.

Negative

• None.

Insights

Financial Analyst

The affirmation of RLI Group's Financial Strength Rating (FSR) and Long-Term Issuer Credit Ratings (Long-Term ICR) by AM Best signifies a robust financial position for the company. The 'A+' (Superior) FSR and 'aa' (Superior) Long-Term ICR are indicative of a company with a solid balance sheet, marked by high levels of risk-adjusted capitalization as per Best's Capital Adequacy Ratio (BCAR). This is a critical aspect for investors as it suggests a strong ability to fulfill policyholder obligations and withstand financial stress.

Furthermore, the stable outlook attached to these ratings implies a consistent performance expectation in the near future. RLI's strategy of returning capital to shareholders through dividends, while maintaining a strong capital position, speaks to its financial prudence and efficient capital management. This could potentially increase investor confidence, possibly influencing the company's stock market performance positively.

RLI's focus on niche markets and specialty insurance products, which are less sensitive to market cycles, provides a competitive edge and diversification benefits. For investors, this indicates a lower risk profile and potential for steady returns, which could be especially attractive in volatile market conditions.

Market Research Analyst

RLI's strong operating performance and favorable business profile, as highlighted by AM Best, suggest the company has effectively capitalized on underserved specialty markets. This strategic positioning allows RLI to potentially achieve above-average industry margins, which is a key driver for long-term shareholder value creation. From a market perspective, this could signal resilience in RLI's stock, particularly as it demonstrates an ability to navigate multiple underwriting cycles with consistent results.

The company's sound pricing discipline and risk optimization contribute to its robust underwriting results. Investors may view this as a testament to RLI's management capabilities, which could be a decisive factor in investment decisions. Additionally, solid investment returns complement the company's operational strengths, potentially leading to a more favorable perception in the equity markets.

Risk Management Consultant

RLI's very strong enterprise risk management, as assessed by AM Best, is a cornerstone of its financial stability. Effective risk management is essential in the insurance industry and RLI's capabilities in this area help mitigate potential losses and stabilize earnings. This is particularly important for long-term investors who seek companies with lower volatility in earnings and dividends.

The company's prudent asset liability management practices ensure that it can meet its long-term obligations without undue risk, which is crucial for maintaining investor confidence. RLI's strategic focus on niche opportunities also demonstrates a proactive approach to risk management, as it allows the company to operate in less competitive segments with potentially higher returns and lower claim frequencies.

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa” (Superior) of the members of RLI Group (RLI). In addition, AM Best has affirmed the Long-Term ICR of “a” (Excellent) of RLI’s publicly traded parent holding company, RLI Corp. [NYSE: RLI]. The outlook of these Credit Ratings (ratings) is stable. All companies are headquartered in Peoria, IL. (See below for a detailed listing of the companies and ratings.)

The ratings reflect RLI’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, favorable business profile and very strong enterprise risk management.

The ratings are supported by RLI’s risk-adjusted capitalization, which is at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), despite the return of significant capital in the form of stockholder dividends to its parent. The overall balance sheet assessment reflects favorable reserve development trends, strong liquidity and prudent asset liability management practices. RLI’s ratings also reflect strong operating performance across extended time periods and multiple underwriting cycles. The consistency in the group’s underwriting results is driven by sound pricing discipline and risk optimization and continues to be augmented by solid investment returns. RLI’s sound risk management capabilities and focus on niche opportunities by concentrating on specialty markets that often are underserved, has helped insulate it from the various stages of the traditional property/casualty market cycle. Further supporting the ratings is the strong financial flexibility afforded by RLI Corp., as evidenced by its modest financial leverage and strong fixed-charge coverage.

The FSR of A+ (Superior) and the Long-Term ICRs of “aa” (Superior), each with a stable outlook, have been affirmed for the members of RLI Group:

• RLI Insurance Company
• Contractors Bonding and Insurance Company
• Mt. Hawley Insurance Company

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2024 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240111888735/en/

Michael Venezia

Senior Financial Analyst

+1 908 882 2414

michael.venezia@ambest.com



Rosemarie Mirabella

Director

+1 908 882 2125

rosemarie.mirabella@ambest.com



Christopher Sharkey

Associate Director, Public Relations

+1 908 882 2310

christopher.sharkey@ambest.com



Al Slavin

Senior Public Relations Specialist

+1 908 882 2318

al.slavin@ambest.com

Source: AM Best

FAQ

What are the Financial Strength Rating (FSR) and Long-Term Issuer Credit Ratings (Long-Term ICR) for RLI Group (RLI)?

AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of 'aa' (Superior) for RLI Group (RLI).

What is the Long-Term ICR of RLI Corp. [NYSE: RLI]?

AM Best has affirmed the Long-Term Issuer Credit Rating (Long-Term ICR) of 'a' (Excellent) for RLI Corp. [NYSE: RLI].

Where are the companies of RLI Group headquartered?

All companies are headquartered in Peoria, IL.

What does the outlook of the Credit Ratings (ratings) for RLI Group and RLI Corp. indicate?

The outlook of the Credit Ratings (ratings) is stable for both RLI Group and RLI Corp.

What factors support RLI's ratings according to AM Best?

RLI's ratings are supported by its balance sheet strength, strong operating performance, favorable business profile, and very strong enterprise risk management.

What is the Best's Capital Adequacy Ratio (BCAR) for RLI?

RLI's risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), is at the strongest level.

How does RLI's underwriting performance contribute to its ratings?

RLI's strong underwriting results are driven by sound pricing discipline, risk optimization, and solid investment returns.

What is the financial flexibility of RLI Corp.?

RLI Corp. has strong financial flexibility, as evidenced by its modest financial leverage and strong fixed-charge coverage.