Jul. 21--PEORIA -- RLI Corp. rode strong underwriting results to a second-quarter profit, overcoming continued economic challenges, the company reported after stock markets closed Monday.

While the operating profit of $28.7 million, or $1.32 a share, was 14.2 percent below the profit of $33.4 million, or $1.53 a share, in the second quarter of 2008, company officials lauded company efforts during the continuing downturn.

"The results of the second quarter show that we effectively managed challenging market and economic conditions," said CEO Jonathan E. Michael in a prepared statement. "Our underwriting skill, financial discipline and new product initiatives position us to achieve growth as market conditions improve."

Unlike the first quarter, RLI realized gains in investments in the second quarter, which helped the company post a net profit of $34.1 million, or $1.57 a share in the quarter, 11.8 percent below the net profit of $38.7 million, or $1.77 a share, in the second quarter last year.

RLI posted a net loss of $1.8 million in the first quarter this year because of heavy investment losses. That helped bring down first-half profits by nearly 50 percent, but the company nonetheless had a net profit of $32.3 million, or $1.48 a share in the first six months, compared with $64.1 million, or $2.91 a share, last year.

RLI said it began focusing its asset allocation "on limiting the impact of volatility in the equity markets, while placing a higher portfolio allocation to short-term investments."

Operating profit for the first six months was $51.1 million, compared with $56.4 million in the first half of 2008, a decline of 9.4 percent.

RLI had underwriting income of $25.1 million in the second quarter on a combined ratio of 79.5 (the amount of claims divided by earned premiums), compared with underwriting income of $29.1 million on a combined ratio of 78 during the second quarter of 2008.

Underwriting income was down slightly in each of three main categories, including casualty, property and surety policies, the company said.

RLI paid a second-quarter cash dividend of 27 cents a share on July 15, a one-cent increase over the prior quarter's dividend.

The company announced that, during the quarter, its A-plus rating by A.M. Best was reaffirmed by the industry rating agency. A.M. Best attributed the rating to "superior capitalization, outstanding long-term operating profitability and financial flexibility."

Also, on July 6, RLI was named to Ward's 50 Top P&C Performers group for the 19th consecutive year. RLI is one of only five property and casualty insurers, from among more than 3,100 companies, to be recognized every year since the group's inception in 1991.

Paul Gordon can be reached at 686-3288 or pgordon@pjstar.com

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