Press Release - February 26, 2002
EMC Insurance Group Inc. Reports Results for Fourth Quarter of 2001 and Declares Quarterly Dividend
DES MOINES, Iowa (Feb 26, 2002)- EMC Insurance Group Inc. (Nasdaq:EMCI) today reported an operating loss of $0.12 per share for the fourth quarter ended December 31, 2001 compared to an operating loss of $0.10 per share in the fourth quarter of 2000. Net loss, including realized investment gains, was $1,262,000 ($0.11 per share) for the fourth quarter ended December 31, 2001 compared to a net loss of $688,000 ($0.06 per share) for the fourth quarter of 2000.
The operating loss for the fourth quarter of 2001 reflects $0.23 per share of adverse development on prior years’ reserves, $0.21 per share of catastrophe and storm losses and $0.08 per share of surety losses stemming from the Enron debacle. The large amount of adverse development on prior years' reserves is attributed to the revaluation of individual claim liabilities in select lines of business, a revaluation of formula based settlement expense reserves and an increase in paid settlement expenses. The catastrophe and storm losses are primarily attributed to the reinsurance segment and reflect an increase in the projected ultimate losses associated with 2000 and 2001 loss events.
Operating loss for the year ended December 31, 2001 was $0.24 per share compared to operating income of $0.12 per share for the year ended December 31, 2000. For the twelve months ended December 31, 2001, net loss, including realized investment gains, was $2,106,000 ($0.19 per share) compared to net income of $2,329,000 ($0.21 per share) for the same period in 2000.
Operating results for the twelve months ended December 31, 2001 were severely impacted by catastrophe and storm losses, which totaled $1.32 per share compared to $0.50 per share for the twelve months of 2000. Excluding the impact of catastrophe and storm losses, the results for 2001 reflect a decline in claims frequency but an increase in overall claims severity. For the twelve months ended December 31, 2001, adverse development on prior years' reserves amounted to $0.30 per share, which compares to a benefit of $0.11 per share for the twelve months of 2000.
Premiums earned increased 14.6 percent to $265,280,000 for the twelve months ended December 31, 2001 from $231,458,000 in 2000. This increase is attributable to rate increases that were implemented during the last two years, an increase in the exposure base of the commercial lines of business and significant growth in the assumed reinsurance business. Premium rate levels for property and casualty insurance continued to improve during 2001 as rate increases ranging from six to thirteen percent were implemented in most lines of business. Premium rate increases grew progressively larger during 2001 and this trend is expected to intensify during 2002; however, it will take time for premium rates to return to adequate levels. Management continues to work toward improving profitability through focused underwriting programs for the existing book of business, reviews of the agency force and controlled usage of discretionary rate credits.
The Company's GAAP combined ratio for the fourth quarter of 2001 was 114.4 percent compared to 115.6 percent in the fourth quarter of 2000. For the twelve months ended December 31, 2001, the GAAP combined ratio was 113.9 percent compared to 112.7 percent for the same period in 2000.
Net book value of the Company's stock as of December 31, 2001 was $12.40 per share, a decrease from $13.14 per share as of December 31, 2000.
The Board of Directors of EMC Insurance Group Inc. has declared a quarterly dividend of $0.15 per share of common stock payable March 19, 2002 to shareholders of record as of March 12, 2002. This is the 81st consecutive quarterly dividend paid.
Employers Mutual Casualty Company has advised the Company that it intends to reinvest 25 percent of its dividends in additional shares of common stock through the Company's dividend reinvestment plan during 2002. Previously, Employers Mutual had been reinvesting 100 percent of its dividends in additional shares of common stock.
EMC Insurance Group Inc. is a publicly held insurance holding company headquartered in Des Moines, Iowa. It owns subsidiaries in property and casualty insurance and reinsurance.
The Private Securities Litigation Reform Act of 1995 provides issuers the opportunity to make cautionary statements regarding forward-looking statements. Accordingly, any forward-looking statement contained in this report is based on management’s current expectations and actual results of the Company may differ materially from such expectations. The risks and uncertainties that may affect the actual results of the Company include but are not limited to the following: catastrophic events and the occurrence of significant severe weather conditions; state and federal legislation and regulations; rate competition; changes in interest rates and the performance of financial markets; the adequacy of loss and settlement expense reserves, including asbestos and environmental claims; rate agency actions and other risks and uncertainties inherent to the Company’s business.
Summary of Consolidated Financial Data
Three Months Ended Year Ended
December 31, December 31,
2001 2000 2001 2000
----------- ----------- ------------ ------------
Premiums earned............ $72,731,765 $64,280,930 $265,279,858 $231,458,442
Net investment
income.................... 7,886,973 7,498,076 30,969,630 29,006,316
Other income............... 184,167 208,483 774,169 1,473,113
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Total revenues............. 80,802,905 71,987,489 297,023,657 261,937,871
Losses and expenses........ 83,468,205 74,715,150 303,366,118 262,431,129
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Operating loss before
income tax benefit........ (2,665,300) (2,727,661) (6,342,461) (493,258)
Realized investment
gains..................... 238,265 653,633 800,582 1,557,870
----------- ----------- ------------ ------------
(Loss) income before
income tax benefit........ (2,427,035) (2,074,028) (5,541,879) 1,064,612
Income tax benefit......... (1,165,143) (1,385,825) (3,435,747) (1,264,419)
----------- ----------- ------------ ------------
Net (loss) income.......... $(1,261,892) $ (688,203) $ (2,106,132) $ 2,329,031
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Operating (loss) income
per share - basic
and diluted............... $ (0.12) $ (0.10) $ (0.24) $ 0.12
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Net (loss) income per
share - basic and
diluted................... $ (0.11) $ (0.06) $ (0.19) $ 0.21
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Dividend per share......... $ 0.15 $ 0.15 $ 0.60 $ 0.60
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Average number of
shares outstanding -
basic and diluted......... 11,323,432 11,293,638 11,312,063 11,284,885
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EMC Insurance Group Inc., Des Moines
Anita Novak (Investors)
515-280-2515
Lisa Hamilton (Media)
515-362-7589
717 Mulberry Street
Des Moines, IA 50309
