Press Release - August 7, 2003
EMC INSURANCE GROUP INC. REPORTS 2003 SECOND QUARTER RESULTS
DES MOINES, Iowa (August 7, 2003) - EMC Insurance Group Inc. (Nasdaq/NM:EMCI) today reported operating income of $0.09 per share for the second quarter ended June 30, 2003 compared to operating income of $0.45 per share for the second quarter of 2002.¹ Operating income for the six months ended June 30, 2003 was $0.76 per share, which equaled the operating income of $0.76 per share reported for the first six months of 2002.
Net income, including realized investment gains/losses, was $1,430,000 ($0.12 per share) for the second quarter of 2003 compared to net income of $2,945,000 ($0.26 per share) for the second quarter of 2002. Net income for the six-month period ended June 30, 2003 totaled $7,876,000 ($0.69 per share) compared to net income of $6,635,000 ($0.58 per share) for the same period in 2002.
Results for the second quarter of 2003 were negatively impacted by a large amount of storm losses and adverse development on prior years’ reserves. Storm losses for the first six months of 2003 are comparable in amount to those experienced during the storm-plagued first six months of 2001; however, the impact of these losses was not as severe because premium rates are much more adequate now than they were in 2001. The adverse development on prior years’ reserves is primarily related to a strengthening of loss reserves in the workers’ compensation line of business and a general strengthening of settlement expense reserves. These reserve increases were implemented in response to recently completed actuarial projections.
Premiums earned increased 11.8 percent to $81,978,000 for the three months ended June 30, 2003 from $73,349,000 for the same period in 2002. For the six-month period ended June 30, 2003, premiums earned increased 14.5 percent to $162,360,000 from $141,858,000 for the same period in 2002. These increases are primarily attributed to rate increases 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 six 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.
“Continued positive investing and operating results brought our book value to a record level,” said President and CEO Bruce G. Kelley. “We are generally pleased with our performance for the first half of the year, even though results for the second quarter are down from last year. The Company monitors claims activity and performs actuarial analyses and projections of loss and settlement expense reserves on a regular basis. As necessary, reserves are strengthened in accordance with established practices that attempt to maintain consistently adequate levels of reserves.”
Catastrophe and storm losses amounted to $10,342,000 ($0.59 per share after tax) in the second quarter of 2003 compared to $3,937,000 ($0.22 per share after tax) in the second quarter of 2002. For the first six months of 2003, catastrophe and storm losses totaled $11,428,000 ($0.65 per share after tax) compared to $4,819,000 ($0.28 per share after tax) for the same period in 2002.
The Company’s GAAP combined ratio was 107.3 percent in the second quarter of 2003 compared to 101.5 percent in the second quarter of 2002. For the first six months of 2003, the GAAP combined ratio was 101.1 percent compared to 102.6 percent for the first six months of 2002.
Net book value of the Company’s stock as of June 30, 2003 was $14.93 per share, an increase of 7.9 percent from $13.84 per share at December 31, 2002.
Employers Mutual Casualty Company has advised the Company that it intends to reinvest 25 percent of its dividends in additional shares of common stock through the Company’s dividend reinvestment plan beginning in the third quarter of 2003. Employers Mutual reinvested 75 percent of its dividends in the second quarter of 2003 and 50 percent of its dividends in the first quarter of 2003.
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 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.
¹The 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.
Consolidated 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