Press Release - August 1, 2002
EMC Insurance Group Inc. Reports 2002 Second Quarter Results
DES MOINES, Iowa (Aug. 1, 2002)- EMC Insurance Group Inc. (Nasdaq/NM:EMCI) today reported operating income of $0.45 per share for the second quarter ended June 30, 2002 compared to an operating loss of $0.25 per share for the second quarter of 2001.
Net income, including realized investment gains/losses, totaled $2,945,000 ($0.26 per share) for the second quarter of 2002 compared to a net loss of $2,846,000 ($0.25 per share) for the second quarter of 2001.
As previously reported, net income for the second quarter of 2002 reflects an "other than temporary" security impairment write down of the Company's investment in MCI Communications Corporation corporate bonds totaling $3,821,000. This write down resulted in a realized loss of $0.22 per share. Total realized losses for the second quarter of 2002 amounted to $3,372,000, or $0.19 per share.
Operating income for the six months ended June 30, 2002 was $0.76 per share compared to an operating loss of $0.10 per share for the same period in 2001. Net income, including realized investment gains/losses, totaled $6,635,000 ($0.58 per share) compared to a net loss of $781,000 ($0.07 per share) for the same period in 2001.
"The improved operating results the Company is experiencing reflect previous rate increases, disciplined underwriting, and a significant decrease in the impact of storm and large losses," said President and CEO Bruce Kelley. "We are on the final approach of the Corporate Strategic Plan we implemented two years ago with the goals of improved rate adequacy, careful underwriting and a review of current and new business opportunities. The six-month results confirm that we are seeing positive results from our business strategy. Premium rate levels have continued to grow larger during the first six months of 2002 and we expect this trend to continue through the rest of the year."
Catastrophe and storm losses amounted to $0.22 per share in the second quarter of 2002 compared to $0.68 per share in the second quarter of 2001. For the first six months of 2002, catastrophe and storm losses totaled $0.28 per share compared to $0.73 per share for the same period of 2001.
The Company's GAAP combined ratio was 101.5 percent in the second quarter of 2002 compared to 119.9 percent in the second quarter of 2001. For the first six months of 2002, the GAAP combined ratio was 102.6 percent compared to 114.4 percent for the first six months of 2001.
Net book value of the Company's stock as of June 30, 2002 was $12.74 per share, an increase 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.
Summary of Consolidated Financial Data
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
---------------------------------------------------------
Premiums earned...... $ 73,348,688 $ 63,315,356 $ 141,858,080 $ 123,409,237
Net investment
income.............. 8,346,315 7,781,702 16,605,026 15,149,897
Other income......... 260,163 196,102 377,275 441,956
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Total revenues....... 81,955,166 71,293,160 158,840,381 139,001,090
Losses and
expenses............ 75,064,484 76,333,584 146,751,295 141,950,763
---------------------------------------------------------
Operating income
(loss) before
income tax expense
(benefit)........... 6,890,682 (5,040,424) 12,089,086 (2,949,673)
Realized investment
(losses) gains...... (3,372,379) 14,662 (3,100,460) 601,738
---------------------------------------------------------
Income (loss)
before income
tax expense
(benefit)........... 3,518,303 (5,025,762) 8,988,626 (2,347,935)
Income tax
expense (benefit)... 573,617 (2,179,897) 2,354,063 (1,567,223)
---------------------------------------------------------
Net income
(loss)...... $ 2,944,686 $ (2,845,865) $ 6,634,563 $ (780,712)
=========================================================
Operating income (loss)
per share.......
- basic and
diluted.... $ 0.45 $ (0.25) $ 0.76 $ (0.10)
=========================================================
Net income (loss) per
share - basic and
diluted.... $ 0.26 $ (0.25) $ 0.58 $ (0.07)
=========================================================
Dividend per
share....... $ 0.15 $ 0.15 $ 0.30 $ 0.30
=========================================================
Average number of
shares outstanding
- basic and
diluted... 11,374,729 11,309,536 11,357,957 11,304,055
=========================================================
Property &
casualty
Written insurance Reinsurance Total
premiums 2002 2001 2002 2001 2002 2001
------------------------------------------------------------------------------------------------
Three months
ended:
March 31,..... $ 54,843,250 $ 63,641,476 $ 17,296,985 $ 12,135,124 $ 72,140,235 $ 75,776,600
June 30,...... 62,295,162 55,052,409 17,683,733 13,832,098 79,978,895 68,884,507
September 30,. - - - - - 0
December 31,.. - - - - - 0
---------------------------------------------------------------------------------
Year to date:..$ 117,138,412 $ 118,693,885 $ 34,980,718 $ 25,967,222 $ 152,119,130 $ 144,661,107
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CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2002 2001
------------- -------------
ASSETS (Unaudited)
-------------------------------------------
Investments:
Fixed maturities:
Securities held-to-maturity, at amortized
cost
(fair value $29,166,513 and $35,502,755)... $27,165,985 $33,572,602
Securities available-for-sale, at fair
value
(amortized cost $387,761,595 and
$384,410,393)............................. 397,356,547 390,214,177
Fixed maturity securities on loan:
Securities held-to-maturity, at amortized
cost
(fair value $37,056,801 and $35,962,133)... 33,453,528 32,505,305
Securities available-for-sale, at fair
value
(amortized cost $23,922,880 and
$27,325,968).............................. 24,489,880 28,436,008
Equity securities available-for-sale, at
fair value
(cost $38,601,739 and $28,686,321)........ 40,301,948 33,322,767
Other long-term investments................ 2,200,229 -
Short-term investments, at cost............ 31,488,569 17,724,458
------------- -------------
Total investments.............. 556,456,686 535,775,317
Cash........................................ 112,552 558,073
Indebtedness of related party............... 6,833,387 -
Accrued investment income................... 9,061,224 8,659,008
Accounts receivable (net of allowance for
uncollectible accounts
of $0 and $573,502)...................... 982,327 1,081,024
Income taxes recoverable.................... - 100,614
Deferred policy acquisition costs........... 23,514,675 21,363,528
Deferred income taxes....................... 19,013,189 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..................... 11,430,840 14,501,336
Prepaid reinsurance premiums................ 3,108,326 2,275,231
Securities lending collateral............... 63,691,867 66,809,518
Other assets................................ 2,028,444 1,170,655
------------- -------------
Total assets.....................$697,175,103 $671,564,697
============= =============
LIABILITIES
-------------------------------------------
Losses and settlement expenses..............$320,706,875 $314,518,588
Unearned premiums........................... 109,993,212 99,382,176
Other policyholders' funds.................. 1,086,608 472,952
Income taxes payable........................ 456,983 -
Indebtedness to related party............... - 2,684,418
Postretirement benefits..................... 7,281,409 6,967,484
Securities lending payable.................. 63,691,867 66,809,518
Other liabilities........................... 12,898,544 15,271,938
Surplus notes payable....................... 36,000,000 25,000,000
------------- -------------
Total liabilities............... 552,115,498 531,107,074
------------- -------------
STOCKHOLDERS' EQUITY
-------------------------------------------
Common stock, $1 par value, authorized
20,000,000 shares; issued and outstanding,
11,389,529 shares in 2002 and 11,329,987
shares in 2001............................. 11,389,529 11,329,987
Additional paid-in capital.................. 67,128,602 66,013,203
Accumulated other comprehensive income...... 7,710,404 7,507,672
Retained earnings........................... 58,831,070 55,606,761
------------- -------------
Total stockholders' equity...... 145,059,605 140,457,623
------------- -------------
Total liabilities and stockholders' equity..$697,175,103 $671,564,697
============= =============
June 30,
(UNAUDITED)
Other data: 2002 2001
--------------------------------------------------------
Book Value Per Share........ $12.74 $12.77
Price to Book Value......... 1.18x 1.19x
Common stock price:
High........................ $23.50 $15.85
Low......................... $15.00 $11.72
Close $15.05 $15.26
Effective tax rate.......... 26.2% (80.6%)
Statutory surplus as regards
policyholders-insurance
subsidiaries (in
thousands).............. $139,929 $111,780
Annualized Data
----------------------------
Net income (loss) as a percent
of beginning stockholders'
equity...................... 9.5% (1.05%)
Average ROE................. 9.3% (1.07%)
P/E Multiple (price/last 4 32.0x (763.0x)
qtrs)......................
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