RLI » Topics » OUTLOOK FOR 2008

These excerpts taken from the RLI 10-K filed Feb 25, 2008.

OUTLOOK FOR 2008

 

The insurance marketplace, and in particular the excess and surplus lines segment, is subject to cycles involving alternating periods of price increases (“hard markets”) and price decreases (“soft markets”). Pricing in the overall insurance marketplace has been on the decline for the past several years. We expect this trend to continue, although each of our insurance segments will likely be impacted by varying degrees. We expect to see premium growth in selected products in 2008 and underwriting income in all three of our insurance segments absent any major catastrophe. Specific details regarding events in our insurance segments follow.

 

CASUALTY

 

We expect the price softening seen in 2007 to continue in 2008. We will maintain our profit-focused strategy and look to broaden our production sources and product offerings as a means to holding our market position and potentially growing this segment. Rising profitability and rising levels of capital for the industry will serve to intensify competition for this segment. We look to our ability to exercise underwriting discipline and select quality risks to continue our profitability in 2008.

 

PROPERTY

 

The industry has taken advantage of recent quiet Atlantic hurricane seasons to rebuild capital depleted by hurricane events in 2005. We believe property pricing will continue to soften in the year ahead. Pricing actions continue to be tempered by greater rating agency focus on catastrophe claims-paying ability. We expect our marine business to grow moderately due to new product offerings and an increased focus on writing inland marine coverages. In addition, the recently launched facultative reinsurance product will be additive to premium in 2008. We expect the segment to produce underwriting income in 2008 absent any major catastrophes.

 

SURETY

 

The surety segment, like our other segments, is expected to feel the pressure of a softening marketplace. Our experienced underwriting staff coupled with our effective use of technology (IT platforms and decision support tools) point to continued profitability in 2008. We expect to see modest premium growth in this segment in 2008.

 

INVESTMENTS

 

Within our investment portfolio, we expect investment income to be relatively flat due to cash flow from operations funding a share repurchase program. At December 31, 2007, we have $85.7 million remaining on the authorized repurchase plan. In addition, reinvestment rates into fixed income securities may be less than previous rates. Twenty percent of our portfolio is invested in equity securities. We expect the dividend income on these securities to grow and the value of this portfolio will be dictated by the performance of the general stock market, which is difficult to predict.

 

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OUTLOOK
FOR 2008



 



The insurance
marketplace, and in particular the excess and surplus lines segment, is subject
to cycles involving alternating periods of price increases (“hard markets”) and
price decreases (“soft markets”). Pricing in the overall insurance marketplace
has been on the decline for the past several years. We expect this trend to
continue, although each of our insurance segments will likely be impacted by
varying degrees. We expect to see premium growth in selected products in 2008
and underwriting income in all three of our insurance segments absent any major
catastrophe. Specific details regarding events in our insurance segments
follow.



 



CASUALTY



 



We expect the
price softening seen in 2007 to continue in 2008. We will maintain our
profit-focused strategy and look to broaden our production sources and product
offerings as a means to holding our market position and potentially growing
this segment. Rising profitability and rising levels of capital for the
industry will serve to intensify competition for this segment. We look to our
ability to exercise underwriting discipline and select quality risks to
continue our profitability in 2008.



 



PROPERTY



 



The industry has
taken advantage of recent quiet Atlantic hurricane seasons to rebuild capital
depleted by hurricane events in 2005. We believe property pricing will continue
to soften in the year ahead. Pricing actions continue to be tempered by greater
rating agency focus on catastrophe claims-paying ability. We expect our marine
business to grow moderately due to new product offerings and an increased focus
on writing inland marine coverages. In addition, the recently launched
facultative reinsurance product will be additive to premium in 2008. We expect
the segment to produce underwriting income in 2008 absent any major
catastrophes.



 



SURETY



 



The surety
segment, like our other segments, is expected to feel the pressure of a
softening marketplace. Our experienced underwriting staff coupled with our
effective use of technology (IT platforms and decision support tools) point to
continued profitability in 2008. We expect to see modest premium growth in this
segment in 2008.



 



INVESTMENTS



 



Within our
investment portfolio, we expect investment income to be relatively flat due to
cash flow from operations funding a share repurchase program. At December 31,
2007, we have $85.7 million remaining on the authorized repurchase plan. In
addition, reinvestment rates into fixed income securities may be less than
previous rates. Twenty percent of our portfolio is invested in equity
securities. We expect the dividend income on these securities to grow and the
value of this portfolio will be dictated by the performance of the general
stock market, which is difficult to predict.



 



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EXCERPTS ON THIS PAGE:

10-K (2 sections)
Feb 25, 2008
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