Zacks Investment Research downgraded shares of RLI Corp. (RLI) from OUTPERFORM to NEUTRAL on May 16, 2013, with a target price of $78.00.
We downgrade RLI Corp. to Neutral from Outperform as it lagged the Zacks Consensus Estimate on both counts. Top line also fell short of our expectation and the year-ago results due to lower Investment income and decline in net realized investment gains. However, the year-over-year improvement in bottom line came on the back of better underwriting results at Casualty and Surety. Net written premium improved 12% in the quarter. In addition, the company continues to deliver higher underwriting income, increasing 33% in the quarter on the back of higher premiums and lower combined ratio. Given the improving pricing scenario in the insurance market supported by strong infrastructure, widened product lines and strategic acquisitions, we expect the company to perform well in the upcoming quarters. It also continues to enhance shareholder value through regular and special dividends. Nevertheless, continued low interest rate environment as well as exposure to cat losses remains matters of concern.
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