Harleysville Profit Lower Than Expected

NU Online News Service, July 28, 1:08 p.m.EDT?Harleysville Group Inc., a regional insurance holdingcompany based in Harleysville, Pa., posted lower second quarterprofit figures and revised its guidance downward for the rest of2003, citing the effects of "unusually large loss activity."

The company's second-quarter net profit was $10.1 million, whichis actually higher than the $296,000 the insurer reported one yearago. But last year's figure took into account a realized investmentloss of $ 13.6 million, and without the investment loss, thecompany would have posted $13.9 million in net profit.

"Unusually large loss activity and the poor performance of ourpersonal lines business were the primary drivers of ourunsatisfactory results in the quarter," said Walter Bateman, chiefexecutive officer at Harleysville.

The increases were driven by weather-related losses andabnormally high large loss activity in its homeowners line, heexplained. Harleysville's personal-lines statutory combined ratiowas 115.8 in the second quarter, worse than 110.7 recorded one yearago.

Net written premiums for personal lines also deteriorated, downseven percent to $49.7 million, compared to one year ago.

Additionally, workers' compensation lines have also beendragging down company earnings. "We have yet to see the expectedimpact of the actions taken to improve personal lines and workers'compensation, but we are not deterred from continuing with ourimprovement plans for these two lines," Mr. Bateman said.

But he also pointed out that overall, the company's commerciallines risk portfolio remains strong, "which now represents about 78percent of our business and continues to show strong growth andpricing."

Harleysville's commercial-lines net written premiums increasedcompared to one year ago, climbing 10 percent to reach $172.9million. The company said the jump in written premiums is mainlydue to higher pricing.