RLI's Investment Yields May Reduce

Oppenheimer retained its “perform” rating on RLI Corp (NYSE: RLI), while reducing its estimates for the company.

The Casualty segment, which usually generates most of RLI’s reserve releases, has accounted for more than half of the company’s premiums for 2009. According to Oppenheimer, if RLI is able to post better-tan-expected earnings in the forthcoming quarters, it will be due to reserve releases from the Casualty segment. Oppenheimer expects RLI to release reserves at a faster pace than estimated, which will continue to drive the company’s expense ratio high.

Moreover, RLI Corp’s portfolio managers may find it tough to generate adequate yield without taking credit risk due to the ongoing steep, yet shallow, yield curve, Oppenheimer says. Oppenheimer reduces its EPS estimates for 2010 by $0.30, primarily driven by lower expectations for investment yields.