Specialty insurer RLI Corp. reported a 9.8 percent decline in 2010 third-quarter net income compared to the 2009 third-quarter net income, driven in part by a rise in loss and settlement expenses.

The Peoria, Ill.-based insurer said 2010 third-quarter net income was $28 million, compared to $31 million a year ago.

Net premiums earned increased 4.6 percent in the quarter to $128.3 million compared to $122.7 million in the 2009 third quarter. The company reported a combined ratio of 83.1, up from 81.3 in last year's third quarter.

Revenues increased by more than $3 million to $149.6 million in the 2010 third quarter compared to $146 million a year ago.

But expenses rose from $103.5 million to $110.3 million during that same period. Loss and settlement expenses increased to $55.8 million compared to $47.7 million a year ago.

RLI President and CEO Jonathan E. Michael said, "Crop and other assumed property reinsurance supported growth in our property business. Our surety group continues to perform well given current economic conditions. Casualty business remained soft, especially for our general liability and transportation product lines."

He added, "We posted solid financial results in the third quarter, despite the continued effects of the soft insurance market and weak economy. Our conservative approach to business during the recent financial crisis and economic downturn has served us well."

For the first nine months of 2010, RLI reported net income of $87.2 million, up 37.8 percent from the same period in 2009. The company saw $15.3 million in net realized investment gains so far in 2010 compared to a net realized loss of $20.8 million in the first nine months of 2009.