received an extension for the submission of its for the secondquarter, and the results the company posted for that period have a materialimpact on at least one key aspect of property and casualty industry financials.
TheMinnesota Department of Commerce said it granted a one-month extension to thecompany, which had requested to delay the filing's submission due to its recentacquisition by Zurich InsuranceGroup Ltd. and the need for further time to prepare the quarterlystatement. The filing is generally due Aug. 15 for the period ended June 30.The NAIC dated its posting of Rural Community's submission for the secondquarter of 2016 as Sept. 14.
RuralCommunity reported a $6.8 million net underwriting gain for the first half of2016 in the filing, up from a net underwriting loss of $16.5 million in theyear-earlier period when it was an indirect subsidiary of The banksold RuralCommunity and its managing general agency parent to in a$697.8 million transaction that closed March 31.
Itsnet premiums earned for the first half of 2016 of $1.1 million marked a declinefrom $57.2 million in the year-earlier period, as ceded premiums earned of$696.8 million nearly exceeded the company's gross premiums earned.Underwriting deductions totaled negative $5.7 million, compared with positive$73.7 million in the first half of 2015.
Directpremiums written of $1.38 billion marked a dramatic increase from $354.9million in the year-earlier period. With the company having reported directpremiums written of negative $25.5 million in the first quarter, the impliedsecond-quarter result exceeds $1.40 billion. Rural Community's second-quarter2015 direct premiums written totaled just $334.6 million, which at the timerepresented its highest premium volume for a second quarter in the 15 years forwhich quarterly results are available.
Thethird quarter traditionally served as Rural Community's most active period froma direct premiums written perspective, and its volume for the third quarter of2015 totaled $1.28 billion, down from $1.44 billion in the year-earlier period.
S&PGlobal Market Intelligence previously reported that commercial lines directpremiums written for the U.S. P&C insurers for which electronic resultswere available as of Sept. 15, excluding the commercial auto physical damageline and all business written by entities under coverage as state funds orresidual markets, had increased by only 1.3% on a year-over-year basis in thefirst half of 2016, compared with growth rates of 4.5% or higher in thecomparable periods of each of the previous four years.
Assumingthat Rural Community's second-quarter 2016 direct premiums written were in linewith those it generated in the year-earlier period, we estimated that the proforma inclusion of its results would add approximately 25 basis points to theindustry's commercial lines growth rate for the first half of the year. Butwith the company's disclosure of the sharply higher second-quarter 2016 premiumvolume, the industry's growth rate would essentially increase by a fullpercentage point to 2.3%, suggesting a materially less unfavorable comparisonrelative to the first-half 2015 growth rate of 4.5%.
Tothe extent there was a pull-forward effect in Rural Community's reporting, theindustry could face a drag on year-over-year comparisons in commercial linesdirect premiums written growth in the third quarter.
RuralCommunity's premium writings were concentrated in the multiperil crop, privatecrop and federal flood lines as they are displayed on the state pages of annualstatement blanks. All those lines roll up into the allied lines as displayed onParts 1 and 2 of quarterly statement blanks, and the SNL product includes theallied lines in its commercial lines consolidation.
Notethat Rural Community's June 30, 2016, financial results are not currentlyincluded in the SNL product. It is one of three P&C companies that filedquarterly statements for the first quarter and generated $100 million or morein direct premiums written during the trailing-12-month period ended March 31for which June 30 results are not currently posted, joining 's and New YorkCentral Mutual Fire Insurance Co. For the former company,first-half 2016 direct premiums written of $101.8 million marked an increase from $89 million inthe year-earlier period. The latter's direct premiums written rose to $228million in the first half of 2016 from $223 million in the year-earlier period.