Investing.com -- Jefferies analysts double-downgraded RLI Corp (NYSE: RLI ). to Underperform from Buy in a note Monday, citing slowing growth, increased competition, and persistent inflationary pressures.

The firm lowered its price target on RLI shares to $61, representing a potential 16% downside from Friday’s close.

In its latest note, Jefferies pointed to "conservatism on casualty lines" and a projected "retrenchment on high-margin property business" as significant headwinds for RLI’s earnings growth in 2025 and 2026.

The analysts cut their EPS estimates for the insurer by 6% and 8% for 2025 and 2026, respectively, now forecasting $3.10 and $3.15. This represents average EPS growth of just 5% over the next two years, with 2026 growth at a particularly sluggish 2%.

Jefferies highlighted the company’s inability to sustain its recent growth trajectory, noting, "We underestimated how quickly property growth would decelerate and how conservative management would be in booking new casualty business."

The firm also pointed to "persistent loss trend inflation" and increased pricing competition as challenges that could weigh on margins.

While acknowledging favorable reserve development in casualty lines, the analysts predicted weaker overall growth dynamics, particularly in property, where they expect RLI to lose market share to competitors willing to sacrifice margin to maintain growth.

"Industry rate is declining beyond a level where we expect RLI to compete," they wrote.

Jefferies assigned RLI a price-to-book (P/B) multiple of 2.8x, lower than the 3.0x historical average, reflecting the weaker setup into 2025 and 2026.

The firm concluded that lower overall growth and underwriting income ROE warrant this more cautious valuation, signaling tougher times ahead for the insurer.