RLI Corp. reported 2008 fourth-quarter net earnings fell $6 million, or 28 cents per share, compared with the 2007 period. Management said the 81.3 percent decrease was due mainly to investment losses.

For the year, the Peoria, Ill.-based company reported net earnings of $78.7 million, or $3.60 per share, a 55.3 percent decrease from the $175.9 million, or $7.30 per share, figure reported in 2007.

The firm provides personal lines, business insurance and surety bonds.

RLI said it had fourth-quarter net realized investment losses of $34.3 million, compared to 2007 fourth-quarter net realized investment gains of $5.6 million. The company attributed much of the losses to a high-yield municipal bond fund and securities in the financial sector that were other than temporarily impaired.

In a conference call, the company noted that it is trying to reduce volatility in its portfolio, has reduced equity exposures to 15 percent, and has no direct exposure to credit default swaps.

The company said operating earnings for the quarter were $28.3 million, compared to $28.3 million in the fourth quarter of 2007.

Underwriting income decreased slightly from $24.7 million in last year's quarter to $24.1 million in this year's fourth quarter. RLI reported underwriting income increases in its casualty and surety segments, and a decrease in its property segment. The combined ratio for the quarter improved slightly dropping to 81.5 from 81.7.

Jonathan E. Michael, RLI president and chief executive officer, noted that all three business segments were profitable. "Our balance sheet remains strong and we are well positioned to capitalize on future marketplace opportunities," he said.

For the year, RLI reported underwriting income of $83.1 million and a combined ratio of 84.2, compared to $155.8 million and 71.4 in 2007.

Mr. Michael said, "Our 84.2 combined ratio marks the 13th consecutive year of underwriting income. We have always believed this is the most important metric to measure RLI's success."

Special Reports /

RLI Q4 Net Income Drops 81.3 Percent On Investment Losses

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