Press Release - November 4, 2003
EMC INSURANCE GROUP INC. REPORTS 2003 THIRD QUARTER RESULTS AND DECLARES 88TH CONSECUTIVE QUARTERLY DIVIDEND
DES MOINES, Iowa (November 4, 2003) - EMC Insurance Group Inc. (Nasdaq/NM:EMCI) today reported operating income of $0.49 per share for the third quarter ended September 30, 2003 compared to $0.46 per share for the third quarter of 2002.¹ Operating income for the nine months ended September 30, 2003 was $1.25 per share compared to $1.21 per share for the same period in 2002.
Net income, including realized investment gains/losses, was $6,382,000 ($0.56 per share) for the third quarter of 2003 compared to $4,301,000 ($0.38 per share) for the third quarter of 2002. Net income for the nine-month period ended September 30, 2003 totaled $14,258,000 ($1.25 per share) compared to $10,936,000 ($0.96 per share) for the same period in 2002.
Results for the third quarter of 2003 were driven by unusually good loss experience in the reinsurance segment, which benefited from a significant decline in reported losses and favorable development on prior year reserves. This improvement in the operating results of the reinsurance segment more than offset a continued high level of storm losses and the previously reported reserve strengthening that occurred in the property and casualty insurance segment during the third quarter. As a result of the high level of storm losses experienced in the third quarter, storm losses for the first nine months of 2003 are greater than those experienced during the storm-plagued first nine months of 2001; however, the impact of these losses is not as severe because premium rate levels are much more adequate now than they were in 2001.
As reported on September 19, 2003, the Company strengthened its bulk loss and settlement expense reserves during the third quarter of 2003 in response to a recently completed actuarial evaluation of the carried reserves for the property and casualty insurance segment. This increase in reserves amounted to $4,583,000 and reduced third quarter earnings by $2,979,000 ($0.26 per share) on an after tax basis. Actuarial evaluations of the Company’s carried reserves are performed on a regularly-scheduled basis and it is the Company’s standard practice to adjust its carried reserves as necessary in response to these evaluations in an effort to maintain a consistent level of reserve adequacy. The adjustment in reserves implemented in the third quarter of 2003 represents an increase of only 1.3 percent of the total loss and settlement expense reserves carried at June 30, 2003.
Premiums earned increased 12.3 percent to $84,210,000 for the three months ended September 30, 2003 from $74,979,000 for the same period in 2002. For the nine-month period ended September 30, 2003, premiums earned increased 13.7 percent to $246,570,000 from $216,837,000 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 as well as significant growth and improved pricing in the assumed reinsurance business. The market for property and casualty insurance remained firm during the third quarter of 2003 and this trend is expected to continue into 2004. The Company has been able to implement moderate rate increases during the first nine months of 2003 and additional rate increases are anticipated for the remainder of the year. These increases will be targeted to specific accounts, territories and lines of business where rates remain inadequate.
“We experienced our most profitable third quarter ever and are on track to surpass our 2002 full year results, despite a continued high level of storm losses and some necessary reserve strengthening,” stated President and CEO Bruce G. Kelley. “Implementation of our long-term strategic plan has resulted in an improved book of business that is more properly priced. We enjoyed the strong performance of our reinsurance segment this quarter and are well positioned for substantially improved results from our property and casualty insurance segment in the future.”
Catastrophe and storm losses amounted to $8,703,000 ($0.49 per share after tax) in the third quarter of 2003 compared to $1,124,000 ($0.06 per share after tax) in the third quarter of 2002. Approximately $1,625,000 ($0.10 per share after tax) of the third quarter catastrophe and storm losses is attributable to Hurricane Isabel. For the first nine months of 2003, catastrophe and storm losses totaled $20,131,000 ($1.14 per share after tax) compared to $5,943,000 ($0.34 per share after tax) for the same period in 2002.
The Company’s GAAP combined ratio was 98.6 percent in the third quarter of 2003 compared to 100.0 percent in the third quarter of 2002. For the first nine months of 2003, the GAAP combined ratio was 100.3 percent compared to 101.7 percent for the first nine months of 2002.
Net book value of the Company’s stock as of September 30, 2003 was $15.13 per share, an increase of 9.3 percent from $13.84 per share at December 31, 2002.
The Board of Directors of EMC Insurance Group Inc. has declared a quarterly dividend of $0.15 per share of common stock payable November 24, 2003 to shareholders of record as of November 17, 2003. This is the eighty-eighth 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 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.
* Statutory data rather than GAAP. However, this data is prepared in accordance with statutory accounting rules as defined by the National Association of Insurance Commissioners’ Accounting Practices and Procedures Manual. Consequently, no reconciliation to GAAP is required by the SEC’s Regulation G.
Consolidated Balance Sheet
* Statutory data rather than GAAP. However, this data is prepared in accordance with statutory accounting rules as defined by the National Association of Insurance Commissioners’ Accounting Practices and Procedures Manual. Consequently, no reconciliation to GAAP is required by the SEC’s Regulation G.
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
