Press Release - March 11, 2003
EMC INSURANCE GROUP INC. RESTATES RESULTS FOR THE FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2002 DUE TO SUBSEQUENT EVENT
RESTATED FINANCIAL HIGHLIGHTS
- Fourth Quarter 2002
- Net Income Per Share — $0.45
- Net Operating Income Per Share — $0.38
- GAAP Combined Ratio — 102.4
- Year Ended December 31, 2002
- Net Income Per Share — $1.42
- Net Operating Income Per Share — $1.60
- GAAP Combined Ratio — 101.9
- Net Book Value Per Share — $13.84
DES MOINES, Iowa—(March 11, 2003)--EMC Insurance Group Inc. (Nasdaq/NM:EMCI) today announced restated results for the fourth quarter and year ended December 31, 2002 due to a subsequent event.
On March 4, 2003, the Company received the results of a “ground-up” study commissioned by the Company to better quantify its exposure to asbestos liabilities. Based on the findings of the consulting actuarial firm that performed this study, the Company decided to increase its reserves for direct asbestos exposures by $2,069,000 at December 31, 2002. As a result of this increase in asbestos reserves, net income declined by $1,345,000 for both the three months and twelve months ended December 31, 2002 from the amounts previously reported on February 25, 2003. Restated net income for the three months ended December 31, 2002 totaled $5,166,000 ($0.45 per share) compared to $6,511,000 ($0.57 per share) previously reported on February 25, 2003. Restated net income for the twelve months ended December 31, 2002 totaled $16,102,000 ($1.42 per share) compared to $17,446,000 ($1.53 per share) previously reported on February 25, 2003.
“Historically, many of our policyholders have been small commercial businesses,” stated Executive Vice President Ron Jean. “Our asbestos claim activity has increased slightly in recent years, but not as significantly as others in the industry. Nonetheless, the recent increase in litigation against ‘peripheral defendants’ prompted our decision to commission an independent study in order to better understand the exposures we have in this evolving legal environment. The consulting actuarial firm commissioned to conduct this study is highly respected for its expertise in performing this type of evaluation. The study was completely voluntary and at the discretion of the Company.”
The study and its results assume no improvement in the current asbestos litigation environment; however, federal legislation is currently being considered which would reduce ultimate losses from asbestos litigation below the levels currently being projected for the industry. In keeping with the conservative nature of our reserving philosophy, we chose to accept the reserve estimate suggested by the study, even though this reserve estimate produces a “survival ratio” (defined as the number of years the reserve will support the current level of claim payments) well above industry norms.
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.
Financial Data
Consolidated Balance Sheets
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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
