Press Release - May 1, 2003
EMC INSURANCE GROUP INC. REPORTS 2003 FIRST QUARTER RESULTS AND EMPLOYERS MUTUAL CASUALTY COMPANY, MAJORITY SHAREHOLDER, ANNOUNCES ADDITIONAL STOCK PURCHASE PROGRAM TO MAINTAIN 80 PERCENT OWNERSHIP THRESHOLD
DES MOINES, Iowa (May 1, 2003)- EMC Insurance Group Inc. (Nasdaq/NM:EMCI) today reported operating income of $0.67 per share for the first quarter ended March 31, 2003 compared to operating income of $0.31 per share for the first quarter of 2002.1 Net income, including realized investment losses/gains, totaled $6,446,000 ($0.57 per share) for the first quarter of 2003 compared to $3,690,000 ($0.33 per share) for the first quarter of 2002.
Premiums earned increased 17.3 percent to $80,382,000 for the three months ended March 31, 2003 from $68,509,000 for the same period in 2002. This increase is primarily attributed to rate increases that were implemented during the last two years in the property and casualty insurance business and growth and improved pricing in the assumed reinsurance business. The Company continued to implement rate increases in the property and casualty insurance business during the first three months of 2003 and additional rate increases are anticipated for the remainder of 2003. These rate increases will be targeted to specific territories and lines of business and generally will be smaller than the rate increases implemented during the past several months.
Catastrophe and storm losses increased slightly to $1,087,000 ($0.06 per share after tax) in the first quarter of 2003 compared to $883,000 ($0.05 per share after tax) for the first quarter of 2002.
“The first quarter of 2003 was our most profitable first quarter ever,” stated President and CEO Bruce G. Kelley. “We are thrilled that improved pricing, prudent risk selection and careful claim management combined to produce these excellent results.”
Net realized investment losses totaled $1,750,000 ($0.10 per share after tax) for the first quarter of 2003. Included in this amount is $1,567,000 of investment impairment losses recognized on the Company’s equity portfolio and $4,342,000 of losses stemming from the sale of American Airlines and United Airlines bonds whose carrying values were no longer supported by the collateral backing these bonds. In addition, the Company’s equity managers recognized $2,689,000 of losses on the sale of equity securities as they rebalanced the Company’s equity portfolio to enhance future returns. These losses were largely offset by $6,854,000 of gains recognized on the sale of certain bond investments.
The Company’s GAAP combined ratio was 94.8 percent in the first quarter of 2003 compared to 103.8 percent in the first quarter of 2002. Net book value of the Company’s stock as of March 31, 2003 was $14.31 per share, an increase from $13.84 per share at December 31, 2002.
On April 9, 2003, Employers Mutual Casualty Company (Employers Mutual) announced that it would purchase up to 30,000 shares of the Company’s common stock on the open market to maintain the 80 percent ownership threshold that it recently obtained. Due to a large number of option exercises by its employees, which result in the issuance of new shares of common stock, Employers Mutual has notified the Company that it will purchase up to an additional 30,000 shares of the Company’s common stock on the open market in order to maintain the 80 percent ownership threshold.
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 insurance entities in Iowa and among the top 60 insurance entities 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.
1 The Company uses a non-GAAP financial measure called “operating income” that management believes is useful to investors because it illustrates the performance of our normal, ongoing operations, which is important in understanding and evaluating our financial condition and results of operations. While this measure is consistent with measures utilized by investors to evaluate performance, it is not a substitute for the U.S. GAAP financial measure of net income. Therefore, we have provided a reconciliation of this non-GAAP financial measure to the U.S. GAAP financial measure of net income in the Summary of Consolidated Financial Data schedule contained in this release. Management also uses non-GAAP financial measures for goal setting, determining employee and senior management awards and compensation, and evaluating performance.
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Balance Sheet
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