EMC Insurance Group Inc. Reports 2003 Third Quarter Results and Declares 88th Consecutive Quarterly Dividend.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)--Nov. 4, 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 $0.49 per share for the third quarter ended September September: see month. 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 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. segment, which benefited from a significant decline in reported losses and favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. 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 ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin 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 June: see month. 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 (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
Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-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 Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). 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 ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $1,625,000 ($0.10 per share after tax) of the third quarter catastrophe and storm losses is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to Hurricane Isabel This article is about the 2003 hurricane; there was also a Tropical Storm Isabel during the 1985 Atlantic hurricane season Hurricane Isabel was the costliest and deadliest hurricane in the 2003 Atlantic hurricane season. . 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 GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (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 December: see month. 31, 2002. The Board of Directors of EMC Insurance Group Inc. has declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. a quarterly dividend of $0.15 per share of common stock payable November November: see month. 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 February: see month. 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 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 Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
------------ ------------ ------------- -------------
Premiums earned $84,210,207 $74,979,176 $246,569,873 $216,837,256
Net investment
income......... 7,013,882 7,934,259 22,247,862 24,539,285
Other income.... 195,993 190,584 628,151 567,859
------------ ------------ ------------- -------------
Total revenues.. 91,420,082 83,104,019 269,445,886 241,944,400
Losses and
expenses....... 83,671,446 75,791,325 249,570,981 222,542,620
------------ ------------ ------------- -------------
Operating income
before income
tax expense.... 7,748,636 7,312,694 19,874,905 19,401,780
Income tax
expense........ 2,129,748 2,139,915 5,624,066 5,579,139
------------ ------------ ------------- -------------
Operating income
after income
tax expense.... 5,618,888 5,172,779 14,250,839 13,822,641
------------ ------------ ------------- -------------
Realized
investment
gains (losses) 1,174,178 (1,340,914) 10,977 (4,441,374)
Income tax
expense
(benefit)...... 410,962 (469,320) 3,842 (1,554,481)
------------ ------------ ------------- -------------
Net realized
investment
gains (losses) 763,216 (871,594) 7,135 (2,886,893)
------------ ------------ ------------- -------------
Net income...... $6,382,104 $4,301,185 $14,257,974 $10,935,748
============ ============ ============= =============
Operating income
per share
- basic and
diluted....... $0.49 $0.46 $1.25 $1.21
============ ============ ============= =============
Net income per
share
- basic and
diluted....... $0.56 $0.38 $1.25 $0.96
============ ============ ============= =============
Dividend per
share.......... $0.15 $0.15 $0.45 $0.45
============ ============ ============= =============
Average number
of shares
outstanding -
basic and
diluted........ 11,471,458 11,391,128 11,439,176 11,369,014
============ ============ ============= =============
Property & Casualty
Insurance Reinsurance
Written premiums(a) 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
September
30,...... 73,490,595 70,786,649 22,159,616 18,301,894
December
31,...... - - - -
--------------------------------------------------
Year to date:.......$198,639,635 $187,925,061 $67,621,321 $53,282,612
==================================================
Total
Written premiums(a) 2003 2002
----------------------------------------------------------------------
Three months ended:
March 31,......................... $83,324,074 $72,140,235
June 30,.......................... 87,286,671 79,978,895
September 30,..................... 95,650,211 89,088,543
December 31,...................... - -
--------------------------
Year to date:...............................$266,260,956 $241,207,673
==========================
(a) 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 Sheets
September 30, December 31,
2003 2002
------------- -------------
ASSETS (UNAUDITED)
------
Investments:
Fixed maturities:
Securities held-to-maturity, at
amortized cost (fair value
$21,753,439 and $61,639,037)......... $19,591,405 $55,033,675
Securities available-for-sale, at fair
value (amortized cost $384,384,236
and $459,844,928).................... 410,137,457 485,855,966
Fixed maturity securities on loan:
Securities held-to-maturity, at
amortized cost (fair value
$33,465,539 and $0).................. 30,647,575 -
Securities available-for-sale, at fair
value (amortized cost $95,304,043 and
$0).................................. 95,523,795 -
Equity securities available-for-sale, at
fair value (cost $39,363,953 and
$38,444,030)........................... 44,283,952 34,596,985
Other long-term investments, at cost.... 3,737,307 3,057,000
Short-term investments, at cost......... 41,628,042 29,650,230
------------- -------------
Total investments............. 645,549,533 608,193,856
Balances resulting from related party
transactions with Employers Mutual:
Reinsurance receivables................. 14,971,636 11,582,136
Prepaid reinsurance premiums............ 5,421,803 2,442,899
Intangible asset, defined benefit
retirement plan........................ 1,411,716 1,411,716
Other assets............................ 2,773,391 1,331,816
Indebtedness of related party........... 17,894,094 -
Cash...................................... 470,899 (119,097)
Accrued investment income................. 7,047,430 9,179,555
Accounts receivable (net of allowance for
uncollectible accounts of $7,297 and
$7,297).................................. 655,332 772,944
Income taxes recoverable.................. - 213,504
Deferred policy acquisition costs......... 29,056,226 24,926,861
Deferred income taxes..................... 11,318,163 13,986,172
Goodwill, at cost less accumulated
amortization of $2,616,234 and $2,616,234 941,586 941,586
Securities lending collateral............. 131,944,998 -
------------- -------------
Total assets................... $869,456,807 $674,863,948
============= =============
LIABILITIES
-----------
Balances resulting from related party
transactions with Employers Mutual:
Losses and settlement expenses.......... $357,126,346 $331,226,753
Unearned premiums....................... 137,495,558 115,746,814
Other policyholders' funds.............. 1,620,877 1,035,622
Surplus notes payable................... 36,000,000 36,000,000
Indebtedness to related party........... - 3,304,539
Employee retirement plans............... 11,448,173 10,014,349
Other liabilities....................... 19,556,391 19,767,507
Income taxes payable...................... 401,528 -
Securities lending obligation............. 131,944,998 -
------------- -------------
Total liabilities............. 695,593,871 517,095,584
------------- -------------
STOCKHOLDERS' EQUITY
--------------------
Common stock, $1 par value, authorized
20,000,000 shares; issued and
outstanding, 11,494,418 shares in 2003
and 11,399,050 shares in 2002............ 11,494,418 11,399,050
Additional paid-in capital................ 68,981,930 67,270,591
Accumulated other comprehensive income.... 19,892,166 14,218,330
Retained earnings......................... 73,494,422 64,880,393
------------- -------------
Total stockholders' equity.... 173,862,936 157,768,364
------------- -------------
Total liabilities and stockholders' equity $869,456,807 $674,863,948
============= =============
Segment Information
(UNAUDITED)
Nine Months Ended Property and
------------------ Casualty Parent
September 30, 2003 Insurance Reinsurance Company Consolidated
------------------ ---------------------------------------------------
Premiums earned... $180,870,135 $65,699,738 - $246,569,873
Losses and
expenses......... 186,816,175 60,418,991 - 247,235,166
---------------------------------------------------
Underwriting
(loss) gain.... (5,946,040) 5,280,747 - (665,293)
Net investment
income........... 15,619,265 6,608,422 $20,175 22,247,862
Other income...... 628,151 - - 628,151
Interest expense.. 726,237 315,929 - 1,042,166
Other expenses.... 811,645 - 482,004 1,293,649
---------------------------------------------------
Operating income
(loss) before
income tax
expense
(benefit)...... 8,763,494 11,573,240 (461,829) 19,874,905
Realized
investment gains
(losses)......... 114,645 (103,668) - 10,977
---------------------------------------------------
Income (loss)
before income
tax expense
(benefit)...... $8,878,139 $11,469,572 $(461,829) $19,885,882
===================================================
Nine Months Ended Property and
------------------ Casualty Parent
September 30, 2002 Insurance Reinsurance Company Consolidated
------------------ ---------------------------------------------------
Premiums earned... $165,989,988 $50,847,268 - $216,837,256
Losses and
expenses......... 166,829,614 53,695,821 - 220,525,435
---------------------------------------------------
Underwriting
loss........... (839,626) (2,848,553) - (3,688,179)
Net investment
income........... 17,669,191 6,775,603 $94,491 24,539,285
Other income...... 567,859 - - 567,859
Interest expense.. 1,005,986 150,308 - 1,156,294
Other expenses.... 558,528 - 302,363 860,891
---------------------------------------------------
Operating income
(loss) before
income tax
expense
(benefit)...... 15,832,910 3,776,742 (207,872) 19,401,780
Realized
investment
(losses) gains... (3,427,908) (1,018,779) 5,313 (4,441,374)
---------------------------------------------------
Income (loss)
before income
tax expense
(benefit)...... $12,405,002 $2,757,963 $(202,559) $14,960,406
===================================================
September 30,
Other data: 2003 2002
----------------------------------------------------------------------
(UNAUDITED)
Book Value Per Share.............................. $15.13 $13.55
Price to Book Value............................... 1.17x 1.05x
Common stock price:
High.......................................... $21.64 $17.20
Low........................................... $17.52 $13.25
Close......................................... $17.66 $14.26
Effective tax rate................................ 28.3% 26.9%
Statutory surplus as regards
policyholders-insurance subsidiaries (in
thousands)(a).................................... $159,486 $135,062
Annualized Data
--------------------------------------------------
Net income (loss) as a percent of beginning
stockholders' equity............................. 12.1% 10.4%
Average ROE....................................... 11.5% 9.9%
P/E Multiple (price/last 4 qtrs).................. 10.4x 9.9x
(a) 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.
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