Is RLI’s 22.6% 2025 Slide Signalling a Value Opportunity or Risk Premium Reset?

• Wondering if RLI is quietly turning into a bargain or if the recent weakness is a warning sign? Let us unpack what the current price is really telling you about its long term value.
• RLI has slipped 1.2% over the last week but is still up 4.3% over the past month, while year to date it is down 22.6% and has fallen 23.8% over the last year, despite posting gains of 7.7% over 3 years and 51.1% over 5 years.
• Recent headlines around the insurance space have focused on shifting risk appetites, reserve adequacy, and the impact of higher rates on investment portfolios. All of these factors influence how investors view RLI today. In particular, commentary about underwriting discipline and exposure to catastrophe heavy lines has made investors more sensitive to how insurers like RLI are priced relative to their fundamentals.
• Right now RLI only scores 1 out of 6 on our undervaluation checks, which might surprise anyone assuming the recent share price slide automatically makes it a deep value play. In the sections that follow, we will walk through the main valuation approaches investors are using on RLI and hint at a more holistic way to judge whether the stock is truly mispriced by the market.

RLI scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: RLI Excess Returns Analysis

The Excess Returns model looks at how much profit RLI can generate over and above the return investors demand on its equity, and then capitalizes those excess profits into an intrinsic value per share.

For RLI, the key drivers look constructive. Book Value stands at $20.41 per share, while Stable EPS is estimated at $3.32 per share, based on weighted future Return on Equity estimates from 7 analysts. With a Cost of Equity of $1.41 per share, the model implies an Excess Return of $1.92 per share, supported by an Average Return on Equity of 16.42%. Stable Book Value is projected at $20.24 per share, also grounded in analyst forecasts.

These inputs are run through the Excess Returns framework to estimate how long RLI can sustain value creating returns and what that is worth today. The resulting intrinsic value is $72.08 per share, and this output is compared with the current market price. On this basis, the stock appears about 12.4% undervalued relative to the latest trading level.

Result: UNDERVALUED

Our Excess Returns analysis suggests RLI is undervalued by 12.4%. Track this in your watchlist or portfolio, or discover 908 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for RLI.

Approach 2: RLI Price vs Earnings

For a consistently profitable insurer like RLI, the price to earnings ratio is a practical way to gauge how much investors are willing to pay for each dollar of current earnings. It naturally links valuation to the company’s profitability today, while also embedding what the market expects RLI to earn tomorrow.

In general, faster earnings growth and lower perceived risk justify a higher “normal” PE multiple. Slower growth, cyclicality or balance sheet concerns argue for a lower one. RLI currently trades on a PE of 16.4x, which is above both the Insurance industry average of about 12.8x and the broader peer group at roughly 10.4x. At face value, that premium suggests investors are already paying up for RLI’s quality and prospects.

Simply Wall St’s Fair Ratio offers a more tailored lens. It estimates what a reasonable PE should be, given RLI’s specific growth outlook, profitability, risk profile, industry, and market cap. For RLI, that Fair Ratio is 9.8x, materially below the current 16.4x. On this basis, the stock screens as meaningfully more expensive than our fundamentals based benchmark.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1442 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your RLI Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, a simple tool on Simply Wall St’s Community page that lets you turn your view of RLI’s business into an explicit financial forecast and Fair Value estimate. For example, you can explore whether competition and catastrophe risk will cap revenue growth near 1.5% with margins easing toward 15.7%, or whether underwriting discipline and niche expansion will keep earnings closer to the more bullish analyst case of around $352 million and justify a higher multiple. Narratives transforms these views into a Fair Value estimate that is continuously updated as new news, earnings, or guidance arrive. This allows you to compare your Fair Value to today’s price of about $67.84 and decide if RLI looks buyable like investors targeting $87.00, closer to a hold like those near the $74.33 consensus, or more of a sell candidate like the more cautious investors at $59.00, all while understanding the story behind the numbers rather than relying only on static ratios.

Do you think there's more to the story for RLI? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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