Press Release - May 2, 2002
EMC Insurance Group Inc. Reports 2002 First Quarter Results
DES MOINES, Iowa (May 2, 2002)- EMC Insurance Group Inc. (Nasdaq/NM:EMCI) today reported operating income of $0.31 per share for the first quarter ended March 31, 2002 compared to operating income of $0.15 per share for the first quarter of 2001. Net income, including realized investment gains, totaled $3,690,000 ($0.33 per share) for the first quarter of 2002 compared to $2,065,000 ($0.18 per share) for the first quarter of 2001.
The improved operating results for the first quarter of 2002 are primarily attributable to an increase in overall premium rate adequacy in both the property and casualty insurance segment and the reinsurance segment. The increase in overall premium rate adequacy is primarily the result of rate increases that were implemented during the last two years; however, tighter underwriting standards also contributed to the improvement. Premium rate increases continued to grow progressively larger during the first quarter of 2002 and this trend is expected to continue through the remainder of the year. Catastrophe and storm losses remained steady at $883,000 ($0.05 per share) in the first quarter of 2002 compared to $871,000 ($0.05 per share) for the first quarter of 2001.
“First quarter 2002 reflects the benefit of corporate directives designed to bring EMC Insurance Group back to profitability. Rate level increases previously initiated are now being realized, and should continue to boost future operating results,” states Bruce G. Kelley, president and chief executive officer of EMC Insurance Group Inc. “We are still increasing rate levels and expect most lines of business to be near adequacy by year-end. Ongoing initiatives for existing accounts and agencies include the careful evaluation and selection of business with a reasonable expectation of profitability. New business is generally limited to that which fits within our core competencies and can be priced adequately. Most premium growth is expected to come from higher rate levels. With regard to the reinsurance segment of our company, results improved during the quarter due to sharply higher premium income and the absence of major catastrophic events.”
The Company’s GAAP combined ratio was 103.8% in the first quarter of 2002 compared to 108.6% in the first quarter of 2001. Net book value of the Company’s stock as of March 31, 2002 was $12.19 per share, a decrease from $12.40 per share at December 31, 2001.
EMC Insurance Group Inc., the publicly-held insurance holding company of EMC Insurance Companies, owns subsidiaries with operations in property and casualty insurance and reinsurance. EMC Insurance Companies is one of the largest property and casualty groups in Iowa and among the top 60 insurance groups nationwide. For more information, visit our website www.emcinsurance.com.
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.
EMC INSURANCE GROUP INC.
Summary of Consolidated Financial Data
(Unaudited)
Three Months Ended
March 31,
2002 2001
------------ ------------
Premiums earned...................... $ 68,509,392 $ 60,093,881
Net investment income ............... 8,258,711 7,368,195
Other income ........................ 117,112 245,854
------------ ------------
Total revenues ...................... 76,885,215 67,707,930
Losses and expenses ................. 71,686,811 65,617,179
------------ ------------
Operating income before
income tax expense .................. 5,198,404 2,090,751
Realized investment gains ........... 271,919 587,076
------------ ------------
Income before income tax expense .... 5,470,323 2,677,827
Income tax expense .................. 1,780,446 612,674
------------ -------------
Net income .......................... $ 3,689,877 $ 2,065,153
============ ============
Operating income per share
- basic and diluted ................ $ 0.31 $ 0.15
============ ============
Net income per share
- basic and diluted ................ $ 0.33 $ 0.18
============ ============
Dividend per share .................. $ 0.15 $ 0.15
============ ============
Average number of shares
outstanding - basic and diluted.... 11,341,184 11,298,575
============ ============
EMC INSURANCE GROUP INC.
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2002 2001
------------- -------------
ASSETS (Unaudited)
------
Investments:
Fixed maturities:
Securities held-to-maturity, at
amortized cost (fair value
$29,423,917 and $35,502,755) ......... $ 28,018,688 $ 33,572,602
Securities available-for-sale,
at fair value (amortized cost
$381,494,630 and $384,410,393)........ 379,380,524 390,214,177
Equity securities available-for-sale,
at fair value (cost $38,951,293
and $28,686,321) ...................... 45,169,083 33,322,767
Short-term investments, at cost ........ 34,702,783 17,724,458
Fixed maturity securities on loan:
Securities held-to-maturity, at
amortized cost (fair value
$36,359,990 and $35,962,133) .......... 33,450,156 32,505,305
Securities available-for-sale, at
fair value (amortized cost
$18,744,068 and $27,325,968) .......... 19,363,053 28,436,008
------------- -------------
Total investments .................... 540,084,287 535,775,317
Cash .................................... 356,192 558,073
Indebtedness of related party ........... 2,642,158 -
Accrued investment income ............... 7,224,109 8,659,008
Accounts receivable (net of allowance
for uncollectible accounts of $0 and
$573,502) .............................. 236,118 1,081,024
Income taxes recoverable ................ - 100,614
Deferred policy acquisition costs ....... 22,047,025 21,363,528
Deferred income taxes ................... 19,748,606 18,328,807
Intangible assets, including goodwill,
at cost less accumulated amortization
of $2,616,234 and $2,616,234 ........... 941,586 941,586
Reinsurance receivables ................. 12,831,445 14,501,336
Prepaid reinsurance premiums ............ 2,588,106 2,275,231
Securities lending collateral ........... 57,983,531 66,809,518
Other assets ............................ 2,891,267 1,170,655
------------- -------------
Total assets .......................... $669,574,430 $671,564,697
============= =============
LIABILITIES
-----------
Losses and settlement expenses .......... $319,046,690 $314,518,588
Unearned premiums ....................... 102,801,858 99,382,176
Other policyholders' funds .............. 796,991 472,952
Income taxes payable .................... 709,971 -
Indebtedness to related party............ - 2,684,418
Postretirement benefits ................. 7,124,447 6,967,484
Securities lending payable .............. 57,983,531 66,809,518
Other liabilities ....................... 17,684,576 15,271,938
Surplus notes payable ................... 25,000,000 25,000,000
------------- -------------
Total liabilities ..................... 531,148,064 531,107,074
------------- -------------
STOCKHOLDERS' EQUITY
--------------------
Common stock, $1 par value, authorized
20,000,000 shares; issued and
outstanding, 11,353,104 shares in
2002 and 11,329,987 shares in 2001 ..... 11,353,104 11,329,987
Additional paid-in capital .............. 66,409,269 66,013,203
Accumulated other comprehensive income 3,069,735 7,507,672
Retained earnings ....................... 57,594,258 55,606,761
------------- -------------
Total stockholders' equity ............ 138,426,366 140,457,623
------------- -------------
Total liabilities and stockholders'
equity ................................. $669,574,430 $671,564,697
============= =============
EMC INSURANCE GROUP INC.
Segment Information
Three Months Ended Property and
------------------ Casualty Parent
March 31, 2002 Insurance Reinsurance Company Consolidated
-------------- ------------------------------------------------
Premiums earned ......$52,443,570 $16,065,822 - $68,509,392
Losses and expenses .. 53,633,572 17,463,866 - 71,097,438
------------------------------------------------
Underwriting loss .. (1,190,002) (1,398,044) - (2,588,046)
Net investment income 6,007,617 2,219,379 $ 31,715 8,258,711
Other income ......... 117,112 - - 117,112
Other expenses ....... 482,872 - 106,501 589,373
------------------------------------------------
Operating income
(loss) before
income tax expense
(benefit) ......... 4,451,855 821,335 (74,786) 5,198,404
Realized investment
gains ............... 248,960 22,959 - 271,919
-----------------------------------------------
Income (loss) before
income tax expense
(benefit) .........$ 4,700,815 $ 844,294 $(74,786) $ 5,470,323
================================================
Three Months Ended Property and
------------------ Casualty Parent
March 31, 2001 Insurance Reinsurance Company Consolidated
-------------- ------------------------------------------------
Premiums earned ......$48,411,021 $11,682,860 - $60,093,881
Losses and expenses .. 51,758,400 13,507,303 - 65,265,703
------------------------------------------------
Underwriting loss .. (3,347,379) (1,824,443) - (5,171,822)
Net investment income 5,315,753 1,998,019 $ 54,423 7,368,195
Other income ......... 230,699 15,155 - 245,854
Other expenses ....... 203,183 - 148,293 351,476
------------------------------------------------
Operating income
(loss) before
income tax expense
(benefit).......... 1,995,890 188,731 (93,870) 2,090,751
Realized investment
gains (losses)....... 597,180 (10,104) - 587,076
------------------------------------------------
Income (loss) before
income tax expense
(benefit)......... $ 2,593,070 $ 178,627 $(93,870) $ 2,677,827
================================================
EMC INSURANCE GROUP INC.
Financial Data Summary
March 31,
(UNAUDITED)
Other data: 2002 2001
----------------------------------------------------------------
Book Value Per Share .................... $12.19 $13.25
Price to Book Value ..................... 1.63 x 0.89 x
Common stock price:
High .................................... $19.90 $13.13
Low ..................................... $15.95 $10.19
Close ................................... $19.89 $11.75
Effective tax rate ...................... 32.55 % 22.88 %
Statutory surplus as regards
policyholders-insurance
subsidiaries (in thousands) ..........$135,452 $117,939
Year Ended December 31,
Other data: 2001 2000 1999 1998
------------------------------------------------------------------
Book Value Per
Share .......... $12.40 $13.14 $12.60 $14.26
Price to Book
Value .......... 1.38 x 0.89 x 0.72 x 0.89 x
Common stock
price:
High ............ $18.75 $12.13 $13.38 $15.88
Low ............. $10.19 $6.81 $9.00 $9.00
Close ........... $17.15 $11.75 $9.13 $12.75
Effective tax
rate ........... (62.00 %) (118.77 %) (86.58 %) (63.70 %)
Statutory surplus
as regards
policyholders-
insurance
subsidiaries (in
thousands) .....$128,736 $110,372 $116,151 $127,252
March 31,
Annualized Data 2002 2001
--------------------------------------------------------------------
Net income (loss) as a percent
of beginning stockholders'
equity .................................. 10.51 % 6.10 %
Average ROE ............................. 10.58 % 6.07 %
P/E Multiple (price/last 4 qtrs)......... (497.25 x) 47.00 x
Year Ended December 31,
Annualized Data 2001 2000 1999 1998
----------------------------------------------------------------------
Net income (loss)
as a percent
of beginning
stockholders'
equity ......... (1.03 %) 1.64 % (0.49 %) 3.70 %
Average ROE ..... (1.46 %) 1.60 % (0.53 %) 3.70 %
P/E Multiple
(price/last 4
qtrs)........... (90.26 x) 55.95 x (130.36 x) 24.10 x
Property & Casualty
Insurance
Written premiums 2002 2001
--------------------------------------------------------
Three months ended:
March 31, ...........$54,843,250 $63,641,476
June 30, ............ - -
September 30, ....... - -
December 31, ........ - -
-------------------------
Year to date: .................$54,843,250 $63,641,476
=========================
Reinsurance Total
Written premiums 2002 2001 2002 2001
-----------------------------------------------------------------
Three months
ended:
March 31, ....$17,296,985 $12,135,124 $72,140,235 $75,776,600
June 30, ..... - - - 0
September 30,. - - - 0
December 31,.. - - - 0
------------------------------------------------
Year to date: ...$17,296,985 $12,135,124 $72,140,235 $75,776,600
================================================
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
