RLI Corp's Insider Buying Signals Confidence Amid Mixed Financials

In the volatile first quarter of 2025, mid-cap stocks faced headwinds from tariff-driven inflation and market uncertainty. Yet RLI Corp. (NYSE: RLI), a provider of niche insurance and risk management solutions, stood out: its insiders executed nearly $950,000 in collective share purchases during January—a bold move signaling confidence in the company’s long-term prospects. For investors weighing RLI’s value amid its recent financial struggles, this insider activity offers a compelling contrast to its reported earnings decline.

The Insider Buying Surge: A Vote of Confidence?

RLI’s mid-cap classification ($7.12 billion market cap) places it squarely in the sweet spot for investors seeking growth without the volatility of small caps. In Q1 2025, five insiders—including CEO W. Craig Kliethermes and Chief Operating Officer Steven Kliethermes—purchased shares at an average price of $72.14. The CEO alone acquired 5,000 shares, boosting his holdings to 139,190. Notably, this marked the first significant insider buying since 2023, with insiders now holding nearly 5% of the company’s stock.

This activity occurred despite a challenging fiscal Q4 2024, during which net earnings fell to $40.9 million ($0.44 per share) from $114.6 million ($1.24 per share) in the prior year. Analysts have attributed the decline to elevated claims costs and inflationary pressures in the insurance sector. Yet insiders’ purchases suggest they believe these challenges are temporary—and that RLI’s core strengths, like its 50-year dividend growth streak, remain intact.

Dividend Discipline Amid Earnings Slump

RLI’s dividend track record is a standout feature. In Q1 2025, the company raised its quarterly payout by 3.4% to $0.15 per share, extending its record of consecutive increases. This consistency contrasts sharply with peers that have frozen or cut dividends during economic downturns. The dividend yield of 1.6% may seem modest, but it aligns with RLI’s conservative capital allocation strategy, prioritizing stability over aggressive growth.

However, the earnings drop raises questions. The $40.9 million profit in Q4 2024 was the lowest quarterly result since 2020, and operating income fell 24% year-over-year. RLI’s focus on niche markets—such as transportation and commercial property insurance—has historically insulated it from broad industry declines, but rising claims costs and inflation have tested this model.

Strategic Moves and Analyst Outlook

RLI’s partnership with TruckerCloud, announced in late 2024, underscores its commitment to innovation. The collaboration integrates telematics data into risk assessments for commercial trucking clients, aiming to reduce accidents and claims costs. While such investments take time to bear fruit, they align with RLI’s reputation for underwriting excellence.

Analysts currently rate RLI a “Hold,” with a $79.80 price target—a 9.8% premium to its April 2025 price of $72.40. The stock’s trailing P/E of 20.76 suggests investors are pricing in recovery expectations, though this valuation is higher than the broader insurance sector’s average of 12–15x earnings.

Conclusion: A Mixed Picture, but Insider Backing Adds Credence

RLI Corp presents a paradox: declining near-term profits but enduring strengths in dividends and insider confidence. The $950,000 in insider purchases in January 2025—coming after years of minimal insider activity—suggests executives believe shares are undervalued. Combined with its 50-year dividend history and strategic moves like the TruckerCloud partnership, RLI’s fundamentals hold promise for patient investors.

However, risks remain. The P/E multiple reflects high expectations for a turnaround in underwriting margins, and the earnings decline underscores execution challenges. For now, RLI appears to be a “Hold”—a stock to consider if the insurance sector recovers, but one requiring close monitoring of its top-line growth and cost controls. As the company’s CEO noted, “Our focus is on the long game,” and the insiders’ bets may prove prescient if RLI’s niche advantages endure.