Press Release - October 31, 2002
EMC Insurance Group Inc. Reports 2002 Third Quarter Results and Declares 84th Consecutive Quarterly Dividend
DES MOINES, Iowa (Oct. 31, 2002)- EMC Insurance Group Inc. (Nasdaq/NM:EMCI) today reported operating income of $0.46 per share for the third quarter ended September 30, 2002 compared to an operating loss of $0.01 per share for the third quarter of 2001. Net income, including realized investment losses, totaled $4,301,000 ($0.38 per share) for the third quarter of 2002 compared to a net loss of $64,000 ($0.01 per share) for the third quarter of 2001.
Operating income for the nine months ended September 30, 2002 was $1.21 per share compared to an operating loss of $0.10 per share for the same period in 2001. Net income, including realized investment losses/gains, totaled $10,936,000 ($0.96 per share) compared to a net loss of $844,000 ($0.07 per share) for the same period in 2001.
“Increased rate adequacy and focused underwriting initiatives have sparked a fundamental improvement in the underlying book of business,” stated President and CEO Bruce G. Kelley. “Results for the first three quarters of this year reflect a company-wide effort to improve profitability. Because of our historically strong reserves, this improvement has not been dampened by the need to make up for prior year reserve deficiencies.” Written premiums for the third quarter 2002 increased by 14.4 percent over third quarter 2001 and by 8.4 percent for the first nine months of 2002 as compared to the same period in 2001.
“Losses from catastrophes and storms are significantly less than last year and slightly below long-term averages,” said Kelley. Catastrophe and storm losses were $0.06 per share in the third quarter of 2002 compared to $0.40 per share reported in the third quarter of 2001, which included claims associated with the terrorist attacks on the World Trade Center. For the first nine months of 2002, catastrophe and storm losses totaled $0.34 per share compared to $1.13 per share for the same period of 2001.
The Company’s GAAP combined ratio was 100.0 percent in the third quarter of 2002 compared to 112.5 percent in the third quarter of 2001. For the first nine months of 2002, the GAAP combined ratio was 101.7 percent compared to 113.7 percent for the first nine months of 2001.
Net book value of the Company’s stock as of September 30, 2002 was $13.55 per share, an increase of 9.3% when compared to $12.40 per share at December 31, 2001.
The Board of Directors of EMC Insurance Group Inc. has declared a quarterly dividend of $0.15 per share of common stock payable November 19, 2002 to shareholders of record as of November 12, 2002. This is the eighty-fourth consecutive quarterly dividend paid since EMC Insurance Group Inc. became a publicly held company in February 1982.
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 Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
------------ ------------ ------------- -------------
Premiums earned......... $74,979,176 $69,138,856 $216,837,256 $192,548,093
Net investment income... 7,934,259 7,932,760 24,539,285 23,082,657
Other income............ 190,584 148,046 567,859 590,002
------------ ------------ ------------- -------------
Total revenues.......... 83,104,019 77,219,662 241,944,400 216,220,752
Losses and expenses..... 75,791,325 77,947,150 222,542,620 219,897,913
------------ ------------ ------------- -------------
Operating income (loss)
before income tax
expense (benefit)...... 7,312,694 (727,488) 19,401,780 (3,677,161)
Realized investment
(losses) gains......... (1,340,914) (39,421) (4,441,374) 562,317
------------ ------------ ------------- -------------
Income (loss) before
income tax expense
(benefit).............. 5,971,780 (766,909) 14,960,406 (3,114,844)
Income tax expense
(benefit)............. 1,670,595 (703,381) 4,024,658 (2,270,604)
------------ ------------ ------------- -------------
Net income (loss)...... $4,301,185 $(63,528) $10,935,748 $(844,240)
============ ============ ============= =============
Operating income (loss)
per share - basic and
diluted.............. $0.46 $(0.01) $1.21 $(0.10)
============ ============ ============= =============
Net income (loss) per
share - basic and
diluted.............. $0.38 $(0.01) $0.96 $(0.07)
============ ============ ============= =============
Dividend per share... $0.15 $0.15 $0.45 $0.45
============ ============ ============= =============
Average number of
shares outstanding -
basic and diluted.... 11,391,128 11,316,708 11,369,014 11,308,273
============ ============ ============= =============
Property & casualty
insurance Reinsurance Total
Written 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,.... 70,786,649 59,729,787 18,301,894 18,149,217 89,088,543 77,879,004
December 31,..... - - - - - 0
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Year to date:...... $187,925,061 $178,423,672 $53,282,612 $44,116,439 $241,207,673 $222,540,111
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Consolidated Balance Sheets
September 30, December 31,
2002 2001
------------- -------------
ASSETS (Unaudited)
------
Investments:
Fixed maturities:
Securities held-to-maturity, at
amortized cost (fair value $30,006,515
and $35,502,755)...................... $28,339,998 $33,572,602
Securities available-for-sale, at fair
value (amortized cost $372,750,283 and
$384,410,393)......................... 396,979,110 390,214,177
Fixed maturity securities on loan:
Securities held-to-maturity, at
amortized cost (fair value $36,841,170
and $35,962,133)...................... 31,455,510 32,505,305
Securities available-for-sale, at fair
value (amortized cost $56,026,658 and
$27,325,968).......................... 57,156,389 28,436,008
Equity securities available-for-sale, at
fair value (cost $37,196,341 and
$28,686,321)............................ 33,961,095 33,322,767
Other long-term investments.............. 3,629,500 -
Short-term investments, at cost.......... 26,668,157 17,724,458
------------- -------------
Total investments.............. 578,189,759 535,775,317
Cash....................................... (289,238) 558,073
Indebtedness of related party.............. 17,443,377 -
Accrued investment income.................. 7,512,262 8,659,008
Accounts receivable (net of allowance for
uncollectible accounts of $0 and $573,502) 592,252 1,081,024
Income taxes recoverable................... 235,035 100,614
Deferred policy acquisition costs.......... 26,543,235 21,363,528
Deferred income taxes...................... 14,369,173 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.................... 10,873,749 14,501,336
Prepaid reinsurance premiums............... 3,540,913 2,275,231
Securities lending collateral.............. 96,485,845 66,809,518
Other assets............................... 1,813,984 1,170,655
------------- -------------
Total assets....................$758,251,932 $671,564,697
============= =============
LIABILITIES
-----------
Losses and settlement expenses.............$323,846,952 $314,518,588
Unearned premiums.......................... 124,191,980 99,382,176
Other policyholders' funds................. 1,036,038 472,952
Indebtedness to related party.............. - 2,684,418
Postretirement benefits.................... 7,438,373 6,967,484
Securities lending payable................. 96,485,845 66,809,518
Other liabilities.......................... 14,891,938 15,271,938
Surplus notes payable...................... 36,000,000 25,000,000
------------- -------------
Total liabilities.............. 603,891,126 531,107,074
------------- -------------
STOCKHOLDERS' EQUITY
--------------------
Common stock, $1 par value, authorized
20,000,000 shares; issued and outstanding,
11,392,184 shares in 2002 and 11,329,987
shares in 2001............................ 11,392,184 11,329,987
Additional paid-in capital................. 67,165,042 66,013,203
Accumulated other comprehensive income..... 14,380,153 7,507,672
Retained earnings.......................... 61,423,427 55,606,761
------------- -------------
Total stockholders' equity..... 154,360,806 140,457,623
------------- -------------
Total liabilities and stockholders' equity.$758,251,932 $671,564,697
============= =============
Segment Information
Nine Months Ended Property and
------------------ Casualty Parent
September 30, 2002 Insurance Reinsurance Company Consolidated
---------------------------- ---------------------------------------------------
Premiums earned........... $165,989,988 $50,847,268 - $216,837,256
Losses and expenses....... 166,829,614 53,695,821 - 220,525,435
---------------------------------------------------
Underwriting loss....... (839,626) (2,848,553) - (3,688,179)
Net investment income..... 17,669,191 6,775,603 $94,491 24,539,285
Other income.............. 567,859 - - 567,859
Interest expense.......... 1,005,986 150,308 - 1,156,294
Other expenses............ 558,528 - 302,363 860,891
---------------------------------------------------
Operating income (loss)
before income tax
expense (benefit)...... 15,832,910 3,776,742 (207,872) 19,401,780
Realized investment
(losses) gains........... (3,427,908) (1,018,779) 5,313 (4,441,374)
---------------------------------------------------
Income (loss) before
income tax expense
(benefit).............. $12,405,002 $2,757,963 $(202,559) $14,960,406
===================================================
Nine Months Ended Property and
------------------ Casualty Parent
September 30, 2001 Insurance Reinsurance Company Consolidated
---------------------------- ---------------------------------------------------
Premiums earned........... $150,458,463 $42,089,630 - $192,548,093
Losses and expenses....... 170,664,639 48,311,801 - 218,976,440
---------------------------------------------------
Underwriting loss....... (20,206,176) (6,222,171) - (26,428,347)
Net investment income..... 16,737,370 6,190,239 $155,048 23,082,657
Other income.............. 550,143 39,859 - 590,002
Other expenses............ 536,953 - 384,520 921,473
---------------------------------------------------
Operating (loss) income
before income tax
benefit................ (3,455,616) 7,927 (229,472) (3,677,161)
Realized investment
gains (losses)........... 576,633 (14,316) - 562,317
---------------------------------------------------
Loss before income
tax benefit............ $(2,878,983) $(6,389) $(229,472) $(3,114,844)
===================================================
September 30,
(UNAUDITED)
Other data: 2002 2001
----------------------------------------------------------------------
Book Value Per Share.............................. $13.55 $12.79
Price to Book Value............................... 1.05x 1.21x
Common stock price:
High.......................................... $17.20 $16.00
Low........................................... $13.25 $13.34
Close......................................... $14.26 $15.50
Effective tax rate................................ 26.9% (72.9%)
Statutory surplus as regards
policyholders-insurance
subsidiaries (in thousands)...................... $135,062 $103,546
Annualized Data
---------------------------------------------------
Net income (loss) as a percent
of beginning stockholders'
equity........................................... 10.4% (.76%)
Average ROE....................................... 9.9% (.77%)
P/E Multiple (price/last 4 qtrs).................. 9.9x (110.7x)
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
