EMC Insurance Group Inc. Reports 2003 Second Quarter Results.Business Editors DES MOINES Des Moines, city, United States Des Moines (dĭ moin`), city (1990 pop. 193,187), state capital and seat of Polk co., S central Iowa, at the junction of the Des Moines and Raccoon rivers; inc. , Iowa--(BUSINESS WIRE)--Aug. 7, 2003 EMC (1) (EMC Corporation, Hopkinton, MA, www.emc.com) The leading supplier of storage products for midrange computers and mainframes. Founded in 1979 by Richard J. Egan and Roger Marino, EMC has developed advanced storage and retrieval technologies for the world's largest companies. Insurance Group Inc. (Nasdaq:EMCI EMCI Envirofacts Master Chemical Integrator EMCI External Memory Control Interface ) today reported operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $0.09 per share for the second quarter ended June June: see month. 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 workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. line of business and a general strengthening of settlement expense reserves. These reserve increases were implemented in response to recently completed actuarial ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin 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 The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. 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 (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Bruce Bruce, Scottish royal family descended from an 11th-century Norman duke, Robert de Brus. He aided William I in his conquest of England (1066) and was given lands in England. G. Kelley Kelley may refer to any of the following: People
As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with established practices that attempt to maintain consistently adequate levels of reserves." Catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). 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 GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (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 December: see month. 31, 2002. Employers Mutual Casualty Company has advised the Company that it intends to reinvest re·in·vest tr.v. re·in·vest·ed, re·in·vest·ing, re·in·vests To invest (capital or earnings) again, especially to invest (income from securities or funds) in additional shares. 25 percent of its dividends in additional shares of common stock through the Company's dividend reinvestment plan Dividend Reinvestment Plan (DRP) Plan which provides for automatic reinvestment of shareholder dividends in more shares of a company's stock, often without commissions. Some plans provide for the purchase of additional shares at a discount to market price. 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 The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 provides issuers the opportunity to make cautionary statements regarding forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . 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 asbestos, mineral asbestos, common name for any of a variety of silicate minerals within the amphibole and serpentine groups that are fibrous in structure and more or less resistant to acid and fire. 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 con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: 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.
Summary of Consolidated Financial Data
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
------------ ------------ ------------- -------------
Premiums earned. $81,977,768 $73,348,688 $162,359,666 $141,858,080
Net investment
income......... 7,387,056 8,346,315 15,233,980 16,605,026
Other income.... 264,328 260,163 432,158 377,275
------------ ------------ ------------- -------------
Total revenues.. 89,629,152 81,955,166 178,025,804 158,840,381
Losses and
expenses....... 88,796,144 75,064,484 165,899,535 146,751,295
------------ ------------ ------------- -------------
Operating
income before
income tax
(benefit)
expense...... 833,008 6,890,682 12,126,269 12,089,086
Income tax
(benefit)
expense........ (215,904) 1,753,950 3,494,318 3,439,224
------------ ------------ ------------- -------------
Operating income
after income
tax (benefit)
expense........ 1,048,912 5,136,732 8,631,951 8,649,862
------------ ------------ ------------- -------------
Realized
investment
gains (losses). 586,584 (3,372,379) (1,163,201) (3,100,460)
Income tax
expense
(benefit)...... 205,304 (1,180,333) (407,120) (1,085,161)
------------ ------------ ------------- -------------
Net realized
investment
gains
(losses).... 381,280 (2,192,046) (756,081) (2,015,299)
------------ ------------ ------------- -------------
Net income. $1,430,192 $2,944,686 $7,875,870 $6,634,563
============ ============ ============= =============
Operating income
per share
- basic and
diluted....... $0.09 $0.45 $0.76 $0.76
============ ============ ============= =============
Net income per
share
- basic and
diluted....... $0.12 $0.26 $0.69 $0.58
============ ============ ============= =============
Dividend per
share.......... $0.15 $0.15 $0.30 $0.30
============ ============ ============= =============
Average number
of shares
outstanding -
basic and
diluted...... 11,442,717 11,374,729 11,423,035 11,357,957
============ ============ ============= =============
Property & casualty
insurance Reinsurance
Written premiums 2003 2002 2003 2002
----------------------------------------------------------------------
Three months ended:
March 31,..... $60,022,622 $54,843,250 $23,301,452 $17,296,985
June 30,...... 65,126,418 62,295,162 22,160,253 17,683,733
-----------------------------------------------------
Year to date:... $125,149,040 $117,138,412 $45,461,705 $34,980,718
=====================================================
Total
Written premiums 2003 2002
----------------------------------------------------------------------
Three months ended:
March 31,............................... $83,324,074 $72,140,235
June 30,................................ 87,286,671 79,978,895
---------------------------
Year to date:............................. $170,610,745 $152,119,130
===========================
Consolidated Balance Sheets
June 30, December 31,
2003 2002
------------- -------------
ASSETS (UNAUDITED)
------
Investments:
Fixed maturities:
Securities held-to-maturity, at
amortized cost(fair value $23,270,855
and $61,639,037)....................... $20,745,186 $55,033,675
Securities available-for-sale, at fair
value(amortized cost $387,788,519 and
$459,844,928).......................... 417,953,300 485,855,966
Fixed maturity securities on loan:
Securities held-to-maturity, at
amortized cost(fair value $33,428,582
and $0)................................ 30,144,246 -
Securities available-for-sale, at fair
value(amortized cost $70,505,300 and
$0).................................... 70,955,510 -
Equity securities available-for-sale, at
fair value(cost $34,630,883 and
$38,444,030)............................ 38,711,870 34,596,985
Other long-term investments, at cost..... 3,475,473 3,057,000
Short-term investments, at cost.......... 54,461,720 29,650,230
------------- -------------
Total investments............. 636,447,305 608,193,856
Balances resulting from related party
transactions with
Employers Mutual:
Reinsurance receivables................. 12,137,066 11,582,136
Prepaid reinsurance premiums............ 4,642,206 2,442,899
Intangible asset, defined benefit
retirement plan........................ 1,411,716 1,411,716
Other assets............................ 3,042,753 1,331,816
Indebtedness of related party........... 15,351,230 -
Cash...................................... (4,280,288) (119,097)
Accrued investment income................. 8,051,825 9,179,555
Accounts receivable (net of allowance for
uncollectible accounts of $7,297 and
$7,297).................................. 1,044,702 772,944
Income taxes recoverable.................. 2,715,969 213,504
Deferred policy acquisition costs......... 26,690,369 24,926,861
Deferred income taxes..................... 9,410,324 13,986,172
Goodwill, at cost less accumulated
amortization of $2,616,234 and $2,616,234 941,586 941,586
Securities lending collateral............. 107,255,529 -
------------- -------------
Total assets................... $824,862,292 $674,863,948
============= =============
LIABILITIES
-----------
Balances resulting from related party
transactions with
Employers Mutual:
Losses and settlement expenses........ $350,985,734 $331,226,753
Unearned premiums..................... 125,962,065 115,746,814
Other policyholders' funds............ 1,353,740 1,035,622
Surplus notes payable................. 36,000,000 36,000,000
Indebtedness to related party......... - 3,304,539
Employee retirement plans............. 10,970,232 10,014,349
Other liabilities..................... 21,241,604 19,767,507
Securities lending obligation............. 107,255,529 -
------------- -------------
Total liabilities............. 653,768,904 517,095,584
------------- -------------
STOCKHOLDERS' EQUITY
--------------------
Common stock, $1 par value, authorized
20,000,000 shares; issued and
outstanding, 11,459,977 shares in 2003
and 11,399,050 shares in 2002............ 11,459,977 11,399,050
Additional paid-in capital................ 68,360,742 67,270,591
Accumulated other comprehensive income.... 22,364,118 14,218,330
Retained earnings......................... 68,908,551 64,880,393
------------- -------------
Total stockholders' equity.... 171,093,388 157,768,364
------------- -------------
Total liabilities and stockholders' equity $824,862,292 $674,863,948
============= =============
Segment Information
(Unaudited)
Six Months Ended Property and
---------------- Casualty Parent
June 30, 2003 Insurance Reinsurance Company Consolidated
------------- ---------------------------------------------------
Premiums earned... $119,547,945 $42,811,721 - $162,359,666
Losses and
expenses......... 120,762,273 43,415,990 - 164,178,263
---------------------------------------------------
Underwriting
loss........... (1,214,328) (604,269) - (1,818,597)
Net investment
income........... 10,738,318 4,439,732 $55,930 15,233,980
Other income...... 432,158 - - 432,158
Interest expense.. 533,112 230,954 - 764,066
Other expenses.... 610,422 - 346,784 957,206
---------------------------------------------------
Operating income
(loss) before
income tax
expense
(benefit)...... 8,812,614 3,604,509 (290,854) 12,126,269
Realized
investment losses (943,531) (219,670) - (1,163,201)
---------------------------------------------------
Income (loss)
before income
tax expense
(benefit)...... $7,869,083 $3,384,839 $(290,854) $10,963,068
===================================================
Six Months Ended Property and
---------------- Casualty Parent
June 30, 2002 Insurance Reinsurance Company Consolidated
------------- ---------------------------------------------------
Premiums earned... $107,811,323 $34,046,757 - $141,858,080
Losses and
expenses......... 109,608,704 35,907,384 - 145,516,088
---------------------------------------------------
Underwriting
loss........... (1,797,381) (1,860,627) - (3,658,008)
Net investment
income........... 12,035,034 4,498,920 $71,072 16,605,026
Other income...... 377,275 - - 377,275
Interest expense.. 666,972 4,747 - 671,719
Other expenses.... 330,657 - 232,831 563,488
---------------------------------------------------
Operating income
(loss) before
income tax
expense
(benefit)...... 9,617,299 2,633,546 (161,759) 12,089,086
Realized
investment
(losses) gains... (2,056,396) (1,049,377) 5,313 (3,100,460)
---------------------------------------------------
Income (loss)
before income
tax expense
(benefit)...... $7,560,903 $1,584,169 $(156,446) $8,988,626
===================================================
June 30,
(UNAUDITED)
Other data: 2003 2002
----------------------------------------------------------------------
Book Value Per Share.............................. $14.93 $12.74
Price to Book Value............................... 1.24x 1.18x
Common stock price:
High........................................... $20.85 $23.50
Low............................................ $18.00 $15.00
Close.......................................... $18.53 $15.05
Effective tax rate................................ 28.2% 26.2%
Statutory surplus as regards
policyholders-insurance subsidiaries
(in thousands)................................... $153,626 $139,929
Annualized Data
--------------------------------------------------
Net income (loss) as a percent of beginning
stockholders' equity............................. 10.0% 9.5%
Average ROE....................................... 9.6% 9.3%
P/E Multiple (price/last 4 qtrs).................. 12.2x 32.0x
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