RLI
RLI Corp.
$55.87
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Moderate
·
Conviction
Undervalued
Trading 32.1% below fair value
You pay
$55.87
Bear
$67.64
Fair
$82.28
Bull
$106.96
Bear
$67.64
+21.1%
ROTCE 19.5% → 4.00x TBV
Fair
$82.28
+47.3%
ROTCE 25.0% → 4.00x TBV
Bull
$106.96
+91.5%
ROTCE 29.9% → 4.00x TBV
Adjust Assumptions
26.0%
6.0%
Key Value Driver
ROTCE (26.0%) vs. cost of equity (6.0%)
Implied Market Multiple
3.3x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (12 analysts)
$59.33
Divergence from AlphaVal
39%
Summary
With ROTCE of 26.0% vs. 6.0% cost of equity, fair P/TBV is 4.00x on $16.91 tangible book, implying $82.28 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 $59.33 (from 12 analysts). Our estimate is 39% 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