RLI
RLI Corp.
$52.56
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Undervalued
Trading 31.8% below fair value
You pay
$52.56
Bear
$70.30
Fair
$77.09
Bull
$100.21
Bear
$70.30
+33.7%
ROTCE 17.5% → 4.00x TBV
Fair
$77.09
+46.7%
ROTCE 23.4% → 4.00x TBV
Bull
$100.21
+90.7%
ROTCE 26.9% → 4.00x TBV
Key Value Driver
ROTCE (23.4%) vs. cost of equity (6.4%)
Implied Market Multiple
2.8x
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