RLI Corp. (NYSE: RLI) and Arch Capital Group (NASDAQ:ACGL) are both mid-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, profitability, analyst recommendations, valuation, institutional ownership, dividends and risk.

Risk and Volatility

RLI Corp. has a beta of 1.21, indicating that its share price is 21% more volatile than the S&P 500. Comparatively, Arch Capital Group has a beta of 0.67, indicating that its share price is 33% less volatile than the S&P 500.

Profitability

This table compares RLI Corp. and Arch Capital Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
RLI Corp. 12.38% 10.10% 3.09%
Arch Capital Group 15.65% 8.76% 2.32%

Analyst Recommendations

This is a summary of recent ratings and recommmendations for RLI Corp. and Arch Capital Group, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
RLI Corp. 1 3 0 0 1.75
Arch Capital Group 0 7 3 0 2.30

RLI Corp. currently has a consensus price target of $41.33, indicating a potential downside of 24.78%. Arch Capital Group has a consensus price target of $92.88, indicating a potential downside of 4.66%. Given Arch Capital Group’s stronger consensus rating and higher probable upside, analysts clearly believe Arch Capital Group is more favorable than RLI Corp..

Valuation & Earnings

This table compares RLI Corp. and Arch Capital Group’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
RLI Corp. $811.78 million 2.98 $129.75 million $2.26 24.31
Arch Capital Group $4.91 billion 2.67 $1.14 billion $5.47 17.81

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

Insider & Institutional Ownership

82.9% of RLI Corp. shares are held by institutional investors. Comparatively, 76.9% of Arch Capital Group shares are held by institutional investors. 6.1% of RLI Corp. shares are held by company insiders. Comparatively, 6.6% of Arch Capital Group shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Dividends

RLI Corp. pays an annual dividend of $0.84 per share and has a dividend yield of 1.5%. Arch Capital Group does not pay a dividend. RLI Corp. pays out 37.2% of its earnings in the form of a dividend. Arch Capital Group has raised its dividend for 40 consecutive years.

Summary

Arch Capital Group beats RLI Corp. on 10 of the 17 factors compared between the two stocks.

RLI Corp. Company Profile

RLI Corp. is a specialty insurance company. The Company underwrites selected property and casualty insurance through subsidiaries, as well as offers insurance coverages in both the specialty admitted, and excess and surplus markets. It operates through Casualty, Property and Surety segments. Its Casualty segment consists of commercial and personal umbrella, general liability, commercial transportation, professional services, small commercial, executive products, medical professional liability and other casualty businesses. Its property segment consists of commercial property, marine, specialty personal, property reinsurance and crop reinsurance businesses. Its surety segment consists of miscellaneous, commercial, contract and energy businesses. The Company conducts its operations principally through three insurance companies: RLI Insurance Company (RLI Ins.), Mt. Hawley Insurance Company (Mt. Hawley) and Contractors Bonding and Insurance Company (CBIC).

Arch Capital Group Company Profile

Arch Capital Group Ltd. provides insurance, reinsurance and mortgage insurance. The Company provides a range of property, casualty and mortgage insurance and reinsurance lines. The Company operates in five segments: insurance, reinsurance, mortgage, other and corporate. The insurance segment’s product lines include construction and national accounts; excess and surplus casualty; lenders products; professional lines; programs; property, energy, marine and aviation; travel, accident and health, and other. The reinsurance segment’s product lines include casualty; marine and aviation; other specialty; property catastrophe; property excluding property catastrophe, and other. The mortgage segment includes the results of Arch Mortgage Insurance Company and Arch Mortgage Insurance Designated Activity Company, which are providers of mortgage insurance products and services to the United States and European markets. The other segment includes the results of Watford Holdings Ltd.

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