RLI
RLI Corp.
$60.65
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Fair Value
Trading 21.3% below fair value
You pay
$60.65
Bear
$63.26
Fair
$77.09
Bull
$100.21
Bear
$63.26
+4.3%
ROTCE 19.5% → 4.00x TBV
Fair
$77.09
+27.1%
ROTCE 25.0% → 4.00x TBV
Bull
$100.21
+65.2%
ROTCE 29.9% → 4.00x TBV
Key Value Driver
ROTCE (26.0%) vs. cost of equity (6.1%)
Implied Market Multiple
3.59x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $56.33 from 12 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $77.09 per share.
Warnings
Traditional cash flow models don't work well for banks — lending activity distorts how much cash the business actually generates.
Common valuation shortcuts don't apply here — for banks, interest payments are a core business cost, not overhead.
Wall Street's average price target is $56.33 (from 12 analysts). Our estimate is 46% above the consensus -- consider that gap carefully.
Key Risks
- Book value quality matters as much as level — check loan loss reserves
- Interest rate sensitivity creates non-linear earnings surprises
- Insurance reserving is actuarial, not financial — errors emerge slowly