RLI (NYSE:RLI) vs. Cincinnati Financial (NYSE:CINF) Head-To-Head Review

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RLI (NYSE:RLI) and Cincinnati Financial (NASDAQ:CINF) are both finance companies, but which is the superior stock? We will compare the two companies based on the strength of their analyst recommendations, risk, dividends, institutional ownership, earnings, profitability and valuation.

Volatility and Risk

RLI has a beta of 0.85, meaning that its share price is 15% less volatile than the S&P 500. Comparatively, Cincinnati Financial has a beta of 0.66, meaning that its share price is 34% less volatile than the S&P 500.

Insider & Institutional Ownership

88.9% of RLI shares are owned by institutional investors. Comparatively, 63.2% of Cincinnati Financial shares are owned by institutional investors. 5.0% of RLI shares are owned by insiders. Comparatively, 7.2% of Cincinnati Financial shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares RLI and Cincinnati Financial’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
RLI $818.12 million 4.85 $64.18 million $2.05 43.43
Cincinnati Financial $5.41 billion 3.13 $287.00 million $3.35 30.91

Cincinnati Financial has higher revenue and earnings than RLI. Cincinnati Financial is trading at a lower price-to-earnings ratio than RLI, indicating that it is currently the more affordable of the two stocks.

Dividends

RLI pays an annual dividend of $0.92 per share and has a dividend yield of 1.0%. Cincinnati Financial pays an annual dividend of $2.24 per share and has a dividend yield of 2.2%. RLI pays out 44.9% of its earnings in the form of a dividend. Cincinnati Financial pays out 66.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. RLI has increased its dividend for 42 consecutive years and Cincinnati Financial has increased its dividend for 58 consecutive years. Cincinnati Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares RLI and Cincinnati Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
RLI 13.11% 11.36% 3.13%
Cincinnati Financial 15.97% 7.35% 2.69%

Analyst Recommendations

This is a summary of recent ratings and recommmendations for RLI and Cincinnati Financial, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
RLI 1 3 0 0 1.75
Cincinnati Financial 0 2 2 0 2.50

RLI presently has a consensus target price of $59.00, suggesting a potential downside of 33.74%. Cincinnati Financial has a consensus target price of $103.33, suggesting a potential downside of 0.21%. Given Cincinnati Financial’s stronger consensus rating and higher probable upside, analysts clearly believe Cincinnati Financial is more favorable than RLI.

Summary

Cincinnati Financial beats RLI on 10 of the 17 factors compared between the two stocks.

About RLI

RLI Corp., an insurance holding company, underwrites property and casualty insurance in the United States and internationally. Its Casualty segment provides commercial and personal coverage products; and general liability products, such as coverage for third-party liability of commercial insureds, including manufacturers, contractors, apartments, and mercantile. This segment also offers coverages for security guards and in the areas of onshore energy-related businesses and environmental liability for underground storage tanks, contractors and asbestos, and environmental remediation specialists; and professional liability coverages focuses on providing errors and omission coverage to small to medium-sized design, technical, computer, and miscellaneous professionals. In addition, this segment provides commercial automobile liability and physical damage insurance to local, intermediate and long haul truckers, public transportation entities, and equipment dealers; incidental and related insurance coverages; inland marine coverages; management liability coverages, such as directors and officers liability insurance, fiduciary liability and fidelity coverages, and for low to moderate classes of risks, including public and private businesses; and healthcare liability and home business insurance products. The company's Property segment offers commercial property, cargo, hull, protection and indemnity, marine liability, inland marine, homeowners' and dwelling fire, and other property insurance products. Its Surety segment offers small bonds for businesses and individuals; bonds for small to medium-sized contractors; commercial surety bonds for medium-to-large businesses; and commercial surety bonds for the energy, petrochemical, and refining industries. The company also underwrites various reinsurance coverages. The company markets its products through branch offices and independent agents. RLI Corp. was founded in 1965 and is headquartered in Peoria, Illinois.

About Cincinnati Financial

Cincinnati Financial Corporation, together with its subsidiary, provides property casualty insurance products in the United States. The company operates in five segments: Commercial Lines Insurance, Personal Lines Insurance, Excess and Surplus Lines Insurance, Life Insurance, and Investments. The Commercial Lines Insurance segment provides coverage for commercial casualty, commercial property, commercial auto, and workers' compensation. It also offers director and officer liability insurance, contract and commercial surety bonds, and fidelity bonds; coverage for property, liability, and business interruption; and machinery and equipment coverage. The Personal Lines Insurance segment provides personal auto insurance; homeowners insurance; and dwelling fire, inland marine, personal umbrella liability, and watercraft coverages to individuals. The Excess and Surplus Lines Insurance segment offers commercial casualty insurance that covers businesses for third-party liability from accidents occurring on their premises or arising out of their operations, such as injuries sustained from products; and commercial property insurance, which insures buildings, inventory, equipment, and business income from loss or damage due to various causes, such as fire, wind, hail, water, theft, and vandalism. The Life Insurance segment provides term life insurance products; universal life insurance products; worksite products, such as term life, whole life, and disability insurance; and whole life insurance products, as well as markets deferred annuities and immediate annuities. The Investments segment invests in fixed-maturity investments, including taxable and tax-exempt bonds, and redeemable preferred stocks; and equity investments comprising common and nonredeemable preferred stocks. The company also offers commercial leasing and financing services; and insurance brokerage services. Cincinnati Financial Corporation was founded in 1950 and is headquartered in Fairfield, Ohio.

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