Harleysville Reports Q1 Operating Earnings Up 13%, Net Income Rises 33%

April 29, 2002

Pennsylvania-based Harleysville Group reported that diluted operating earnings per share increased 13 percent to $0.43 in the first quarter of 2002, compared with $0.38 in 2001, while diluted net income rose 33 percent to $0.44 per share in 2002, compared with $0.33 per share in 2001.

The operating earnings figure excludes realized gains and losses from investments, which were down slightly. Total revenues, which include them increased 4 percent in the first quarter to $208.2 million in 2002, compared with $200.3 million in 2001.

its results for 2002. First quarter — a new first quarter record — Operating earnings exclude after-tax diluted realized investment gains of $0.01 per share in the first quarter of 2002, versus realized losses of $0.05 per share in 2001.

“Our first quarter operating earnings were the best first quarter results in our company’s history and reflect the continuing success of our strategy,” Walter R. Bateman, Harleysville Group’s chairman, president CEO said in the announcement. “Our commercial lines combined ratios are at or below 100 percent in all but one line of business, and we continue to build margins in this segment, which now represents about three-quarters of our risk portfolio. As well, we are particularly encouraged by the 10-point improvement in our personal lines combined ratio over last year.”

“Earned premiums were up 3 percent to $182.5 million in the first quarter of 2002 compared with $177.3 million in 2001. Net written premiums for the first quarter were up 4 percent to $190.7 million from $183.0 million in 2001. Excluding those unprofitable markets where Harleysville has significantly reduced personal lines volume, net written premiums would have grown 8.5 percent,” the announcement indicated.

Bateman explained that the problem areas were in workers compensation and personal auto, which have “been stung by the higher loss costs caused by rising medical inflation.” He said the company was addressing the problems by “culling poorer-performing classes from our book of business and taking every step possible to adequately price this portion of our risk portfolio.”

The report cited the fact that personal lines net written premiums had declined by 19 percent in the first quarter to $44.2 million in 2002 from $54.7 million in 2001. “The reduction relates to actions taken to reduce personal lines volume in unprofitable markets,” said the announcement, and resulted in an improvement in the company’s personal lines combined ratio to 103.1 percent in the first quarter.

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