Penn Millers Holding Corp., parent company of Penn Millers Insurance Co., reported a net income of $1.4 million for the third quarter.

The Wilkes-Barre, Pa.-based company reported a loss of $4 million for the same period last year.  Penn Millers Insurance Co. provides agribusiness insurance in 33 states and commercial lines insurance in eight states, including Maryland, New Jersey, New York, Pennsylvania and Virginia.

The company’s operating income also rose to $1.4 million in the third quarter, an increase from the $500,000 it reported in the third quarter of 2008. Penn Millers’ book value grew 8.7% for the quarter, the company said.

“We believe that the actions we have taken in the recent past to exit unprofitable business are taking hold,” said Douglas A. Gaudet, president and chief executive officer of the company, in a statement.

On Oct. 16, Penn Millers sold 5.4 million shares of common stock in a concurrently-held subscription and community offering for $10 per share, raising about $45.2 million.

The $5.4 million improvement in net income was primarily due to lower catastrophe losses of $500,000, after tax this year, compared to the same period in 2008, realized losses on investments of $2.1 million after tax and net loss after tax from discontinued operations of $2.4 million for the same quarter in 2008. The company also said a provision for income taxes included a tax benefit of $800,000 from the reversal of the deferred tax valuation allowance that was recorded as of Dec. 31, 2008.

For the first nine months of this year, net income was $1.3 million, compared to a net loss of $2.5 million for the nine months ending Sept. 30, 2008. The $3.8 million improvement in net income was attributed primarily to lower catastrophe losses of $2 million, after tax, this year, compared to the same period of 2008, as well as lower realized losses on investments of $700,000, after tax, a lower net loss after tax from discontinued operations of $1.7 million, and the reversal of the deferred tax valuation allowance in the third quarter this year.

Partly offsetting the improvements in the three- and nine-month results is its stop loss contract. In 2008, the company entered into a two-year aggregate stop loss reinsurance contract covering the 2008 and 2009 accident years. The company’s experience under the stop-loss reinsurance contract was a $300,000 net benefit for the third quarter of 2008 and a benefit of $500,000for the nine months of 2008.

This year, the company experience under the stop-loss reinsurance contract was a net cost $100,000 for the third quarter of 2009 and a cost of $1.5 million after tax for the nine months of 2009. This stop loss reinsurance contract provided short-term capital protection for accident years 2008 and 2009.

With its recent stock offering, the company does not anticipate the need for a similar contract again, company officials said in a statement.

The company’s third quarter net premiums written increased 2.3% percent, to $22.9 million. Net premiums written through nine months were down 6.8% percent, to $56.3 million in 2009.

A continued focus on underwriting discipline and rate adequacy in the midst of this soft market combined with the commercial business segments withdrawing from certain unprofitable classes of business and terminating relationships with a small number of underperforming producers resulted in the decreases in net premiums written and earned this year.

“Despite the soft market, Penn Millers is committed to maintaining underwriting discipline and price adequacy and is willing to walk away from business that is not appropriately priced,” Guadet said.

The Company provides property and casualty insurance through its wholly owned subsidiary, Penn Millers Insurance Company.