Harleysville Profit Lower Than Expected

Harleysville Profit Lower Than Expected

NU Online News Service, July 28, 1:08 p.m. EDT?Harleysville Group Inc., a regional insurance holding company based in Harleysville, Pa., posted lower second quarter profit figures and revised its guidance downward for the rest of 2003, citing the effects of "unusually large loss activity."

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

"Unusually large loss activity and the poor performance of our personal lines business were the primary drivers of our unsatisfactory results in the quarter," said Walter Bateman, chief executive officer at Harleysville.

The increases were driven by weather-related losses and abnormally high large loss activity in its homeowners line, he explained. Harleysville's personal-lines statutory combined ratio was 115.8 in the second quarter, worse than 110.7 recorded one year ago.

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

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

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

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