With 81% ownership, RLI Corp. (NYSE:RLI) boasts of strong institutional backing

Key Insights

• Institutions' substantial holdings in RLI implies that they have significant influence over the company's share price
• A total of 12 investors have a majority stake in the company with 50% ownership
• Insiders have been buying lately

Every investor in RLI Corp. (NYSE:RLI) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 81% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Given the vast amount of money and research capacities at their disposal, institutional ownership tends to carry a lot of weight, especially with individual investors. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.

In the chart below, we zoom in on the different ownership groups of RLI.

View our latest analysis for RLI

What Does The Institutional Ownership Tell Us About RLI?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in RLI. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at RLI's earnings history below. Of course, the future is what really matters.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in RLI. Looking at our data, we can see that the largest shareholder is The Vanguard Group, Inc. with 10.0% of shares outstanding. State Street Global Advisors, Inc. is the second largest shareholder owning 9.6% of common stock, and BlackRock, Inc. holds about 8.3% of the company stock.

After doing some more digging, we found that the top 12 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of RLI

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

We can see that insiders own shares in RLI Corp.. This is a big company, so it is good to see this level of alignment. Insiders own US$268m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

With a 15% ownership, the general public, mostly comprising of individual investors, have some degree of sway over RLI. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand RLI better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for RLI you should be aware of.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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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.