RLI Corp: A Fortress of Dividend Growth in Volatile Markets

In a world where market volatility has become the new normal, income investors are scrambling for assets that combine steady cash flows with proven resilience. RLI Corp (RLI) emerges as a rare gem: a insurer with a 50-year dividend growth streak and a 29-year track record of underwriting profits, positioning it as a top-tier income play for defensive portfolios. Despite a modest yield, RLI’s fortress-like balance sheet and niche underwriting expertise make it a compelling choice for investors prioritizing capital preservation and dividend reliability.

The Dividend Machine: 50 Years of Unbroken Growth

RLI’s dividend history is unmatched. Since 1975, it has increased its dividend every year, with a 3.4% boost in Q1 2025 raising the quarterly payout to $0.15 per share. This consistency isn’t luck—it’s the result of deliberate capital management. Even in 2024, amid catastrophic losses from hurricanes and wildfires, RLI maintained its streak, returning $183.5 million to shareholders via dividends, including a $2.00 special dividend.

While its current yield of 0.8% may seem low, RLI’s dividend is growth-focused, with average annual hikes of 4.9–5.0% over the past decade. For long-term investors, this compounding power is a game-changer. A $10,000 investment in 2010 would have seen dividends alone grow from $40/year to $130/year today, with total returns amplified by book value growth.

Underwriting Resilience: The Bedrock of Stability

RLI’s dividend reliability stems from its underwriting discipline. For 29 consecutive years, it has produced underwriting profits, a feat unmatched in the insurance sector. In 2024, despite $93.6 million in hurricane-related losses, it posted an 86.2 combined ratio, a metric that measures profitability (below 100 = profitable). This outperformance is no accident:

• Niche Markets: RLI focuses on specialty property, casualty, and surety lines, avoiding crowded sectors. Its Property segment, for instance, delivered a 68.5 combined ratio in 2024, leveraging favorable reserve development and disciplined risk selection.
• Reserve Strength: Favorable adjustments to prior-year reserves contributed $84.1 million to 2024 underwriting income, a testament to conservative reserving practices.
• Catastrophe Management: While hurricanes like Milton caused pain, RLI’s A+ (Superior) AM Best rating and $1.78 billion statutory surplus ensure it can weather storms without diluting shareholder value.

Addressing Valuation Concerns and Risks

Critics may argue RLI is overvalued at a price-to-book ratio of 1.4 (vs. peers averaging 0.8–1.0). However, this premium is justified:
- Balance Sheet Fortitude: Its book value per share rose 6% year-over-year to $17.48 in early 2025, backed by $2.01 billion in gross premiums and a fortress balance sheet.
- Income Quality: Dividends are covered 2.3x by operating cash flow, far exceeding the industry average.

Technical Risks:
- Interest Rate Sensitivity: A rising rate environment could pressure investment returns, though RLI’s $4.6 billion investment portfolio is diversified and high-quality.
- Catastrophe Exposure: Weather volatility remains a wildcard, but RLI’s reinsurance layers and geographic diversification mitigate this risk.

Why Act Now?

Market turbulence isn’t going away. RLI’s dividend growth and underwriting resilience make it a “buy-and-forget” asset for income portfolios. While peers cut dividends during crises, RLI has never reduced its payout, even through 2008 and 2020.

Investors seeking low-risk income with high-growth potential should act:
- Dollar-cost average into RLI to smooth volatility.
- Compare it to bonds: Its dividend growth outpaces most fixed-income alternatives, offering inflation protection.
- Focus on total return: A 0.8% yield plus 5% annual dividend growth and book value appreciation creates a ~6% total return target—a steal for such safety.

Final Verdict

RLI Corp isn’t just a dividend stalwart—it’s a capital preservation powerhouse. With 50 years of unbroken growth and a fortress balance sheet, it’s a must-own for investors navigating uncertainty. While valuation isn’t cheap, the risk-reward tradeoff is unmatched in the insurance sector. For long-term portfolios, RLI is a rare blend of income, growth, and stability—act now before its premium widens further.

In a volatile world, RLI Corp is the dividend investor’s safe harbor. Anchor your portfolio here.