Press Release - August 5, 2004
EMC INSURANCE GROUP INC. REPORTS 2004 SECOND QUARTER RESULTS
DES MOINES, Iowa (August 5, 2004) - EMC Insurance Group Inc. (Nasdaq/NM:EMCI) today reported operating income of $0.12 per share for the second quarter ended June 30, 2004 compared to operating income of $0.09 per share for the second quarter of 20031. Operating income for the six months ended June 30, 2004 was $0.82 per share compared to $0.76 per share for the same period in 2003.
Net income, including realized investment gains/losses, was $3,466,000 ($0.30 per share) for the second quarter of 2004 compared to $1,430,000 ($0.12 per share) for the second quarter of 2003. Net income for the six months ended June 30, 2004 was $11,815,000 ($1.02 per share) compared to $7,876,000 ($0.69 per share) for the same period in 2003. During the second quarter of 2004 the Company recognized $2,558,000 ($1,663,000 or $0.14 per share after tax) of realized investment gains on its investment in MCI Communications Corporation bonds in conjunction with a payout award received under a bankruptcy court approved “Plan of Reorganization.” These bonds had previously been determined to be other-than-temporarily impaired during the second quarter of 2002.
As reported on June 15, 2004, the Company strengthened its bulk loss and settlement expense reserves during the second quarter of 2004 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 $2,940,000 and reduced second quarter earnings by $1,910,000 ($0.17 per share) on an after tax basis. Actuarial evaluations of the Company’s carried reserves are performed on a regularly-scheduled basis and additional evaluations will be performed during the remainder of the year. The Company’s standard practice is 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 second quarter of 2004 represents an increase of 0.8 percent of the total loss and settlement expense reserves carried at March 31, 2004.
Premiums earned increased 2.4 percent to $83,984,000 for the three months ended June 30, 2004 from $81,978,000 for the same period in 2003. For the six-month period ended June 30, 2004, premiums earned increased 3.1 percent to $167,443,000 from $162,360,000 for the same period in 2003. These increases are primarily attributed to rate increases implemented during the prior two years in the property and casualty insurance business as well as moderate growth and improved pricing in the assumed reinsurance business. The overall market for property and casualty insurance remained firm during the second quarter of 2004 but moderated slightly in certain lines of business and select territories due to an increase in price competition. No significant changes are anticipated in the commercial lines marketplace for the remainder of the year and the Company will continue to implement rate increases in those lines of business and/or territories where such action is warranted; however, the overall level of these rate increases is expected to be smaller than those implemented during the past several months.
“We are pleased with our results for the first half of 2004,” stated President and CEO Bruce G. Kelley. “As demonstrated by our recent reserve strengthening actions, we are committed to maintaining adequate reserve levels. This commitment, coupled with our solid book of business, has positioned us well for the second half of the year.”
Catastrophe and storm losses declined significantly to $7,197,000 ($0.40 per share after tax) in the second quarter of 2004 from $10,342,000 ($0.59 per share after tax) in the second quarter of 2003. For the first six months of 2004, catastrophe and storm losses totaled $8,212,000 ($0.46 per share after tax) compared to $11,428,000 ($0.65 per share after tax) for the same period in 2003.
The Company’s GAAP combined ratio was 107.0 percent in the second quarter of 2004 compared to 107.3 percent in the second quarter of 2003. For the first six months of 2004, the GAAP combined ratio was 100.4 percent compared to 101.1 percent for the same period in 2003.
Net book value of the Company’s stock as of June 30, 2004 was $15.81 per share, compared to $15.72 per share at December 31, 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. When we use the words “believe”, “expect”, “anticipate”, “estimate” or similar expressions, we intend to identify forward-looking statements. You should not place undue reliance on these forward-looking statements.
ąThe 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
