EMC Insurance Group Inc. Reports 2004 First 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)--April 29, 2004 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 ): First Quarter 2004 Net Income Per Share -- $0.72 Net 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. Per Share -- $0.70 GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). Combined Ratio -- 93.8% EMC Insurance Group Inc. (Nasdaq:EMCI) today reported record operating income of $0.70 per share for the first quarter ended March 31, 2004 compared to operating income of $0.67 per share for the first quarter of 2003(1). Net income, including realized investment gains/losses, was $8,349,000 ($0.72 per share) for the first quarter of 2004 compared to $6,446,000 ($0.57 per share) for the first quarter of 2003. "We are pleased to report another record-breaking Adj. 1. record-breaking - surpassing any previously established record; "a record-breaking high jump"; "record-breaking crowds" best - (superlative of `good') having the most positive qualities; "the best film of the year"; "the best solution"; "the best time for quarter," 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
1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. initiatives and some necessary rate increases that were implemented during the last several years. Achieving an underwriting profit Underwriting profit is a term used in the insurance industry. It consists of the earned premium remaining after losses have been paid and administrative expenses have been deducted. It does not include any investment income earned on held premiums. is always stressed, but has become even more critical in this lingering lin·ger v. lin·gered, lin·ger·ing, lin·gers v.intr. 1. To be slow in leaving, especially out of reluctance; tarry. See Synonyms at stay1. 2. low interest rate environment." Premiums earned increased 3.8 percent to $83,458,000 for the three months ended March 31, 2004 from $80,382,000 for the same period in 2003. This increase is primarily attributed to rate increases implemented during the last several years in the property and casualty insurance business as well as moderate 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 market for property and casualty insurance remained firm during the first quarter of 2004 and no significant changes are anticipated in the marketplace for the remainder of the year. The Company will continue to implement rate increases in those lines of business and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. territories where such action is warranted, but the overall level of these rate increases is expected to be smaller than those implemented during 2003. Catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). and storm losses declined slightly to $1,015,000 ($0.06 per share after tax) in the first quarter of 2004 from $1,087,000 ($0.06 per share after tax) in the first quarter of 2003. The Company's GAAP combined ratio was 93.8 percent in the first quarter of 2004 compared to 94.8 percent in the first quarter of 2003. Net book value of the Company's stock as of March 31, 2004 was $16.58 per share, an increase of 5.5 percent from $15.72 per share at December December: see month. 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 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
Three Months Ended
March 31,
(Unaudited)
2004 2003
------------ ------------
Premiums earned...........................$83,458,282 $80,381,898
Net investment income..................... 7,273,977 7,846,924
Other income.............................. 76,479 167,830
------------ ------------
Total revenues............................ 90,808,738 88,396,652
Losses and expenses....................... 78,845,905 77,103,391
------------ ------------
Operating income before income tax expense 11,962,833 11,293,261
Income tax expense........................ 3,874,081 3,710,223
------------ ------------
Operating income after income tax expense 8,088,752 7,583,038
------------ ------------
Realized investment gains (losses)........ 400,527 (1,749,785)
Income tax expense (benefit).............. 140,184 (612,425)
------------ ------------
Net realized investment gains (losses).... 260,343 (1,137,360)
------------ ------------
Net income................................ $8,349,095 $6,445,678
============ ============
Operating income per share - basic and
diluted.................................. $0.70 $0.67
============ ============
Net income per share - basic and diluted.. $0.72 $0.57
============ ============
Dividend per share........................ $0.15 $0.15
============ ============
Average number of shares outstanding -
basic and diluted........................ 11,522,643 11,403,353
============ ============
Other Data:
Book Value Per Share $16.58 $14.31
Price to Book Value 1.27 X 1.32 X
Common Stock Price $21.06 $18.90
Effective Tax Rate 32.50 % 32.50 %
Statutory Surplus as Regards
Policyholders- insurance subsidiaries (in
thousands)(a) $177,458 $149,740
Annualized Data:
Net Income as a percent of beginning
stockholders' equity 18.50 % 16.30 %
Average ROE 18.00 % 16.10 %
P/E Multiple (price/last 4 qtrs) 10.90 X 11.40 X
(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
March 31, December 31,
2004 2003
------------- -------------
ASSETS (Unaudited)
------
Investments:
Fixed maturities:
Securities held-to-maturity, at amortized
cost (fair value $18,573,752 and
$21,167,655).......................... $16,905,734 $19,423,013
Securities available-for-sale, at fair
value (amortized cost $383,706,346 and
$382,326,388)......................... 411,247,825 405,758,798
Fixed maturity securities on loan:
Securities held-to-maturity, at amortized
cost (fair value $33,458,969 and
$32,686,769).......................... 31,550,410 30,422,335
Securities available-for-sale, at fair
value (amortized cost $121,903,692 and
$117,184,150)......................... 122,405,385 118,026,960
Equity securities available-for-sale, at
fair value (cost $40,764,861 and
$38,998,075)............................ 51,937,803 49,008,498
Other long-term investments, at cost..... 5,055,044 4,758,019
Short-term investments, at cost.......... 57,484,923 63,568,064
------------- -------------
Total investments.............. 696,587,124 690,965,687
Balances resulting from related party
transactions with Employers Mutual:
Reinsurance receivables.................. 15,868,253 15,861,754
Prepaid reinsurance premiums............. 3,564,725 3,297,228
Intangible asset, defined benefit
retirement plan......................... 1,016,492 1,016,492
Other assets............................. 3,518,058 1,857,284
Indebtedness of related party............ 1,833,422 -
Cash....................................... 141,454 (14,069,102)
Accrued investment income.................. 6,919,410 7,821,652
Accounts receivable (net of allowance for
uncollectible accounts of $0 and $0)...... 197,473 379,423
Deferred policy acquisition costs.......... 26,963,725 26,737,784
Deferred income taxes...................... 8,415,983 10,345,429
Goodwill, at cost less accumulated
amortization of $2,616,234 and $2,616,234 941,586 941,586
Securities lending collateral.............. 159,765,318 154,556,758
------------- -------------
Total assets....................$925,733,023 $899,711,975
============= =============
LIABILITIES
-----------
Balances resulting from related party
transactions with Employers Mutual:
Losses and settlement expenses...........$371,466,276 $367,923,881
Unearned premiums........................ 126,075,373 124,832,607
Other policyholders' funds............... 1,359,249 1,390,594
Surplus notes payable.................... 36,000,000 36,000,000
Indebtedness to related party............ - 2,175,118
Employee retirement plans................ 11,077,269 9,965,600
Other liabilities........................ 24,516,175 19,336,366
Income taxes payable....................... 4,036,355 2,780,500
Securities lending obligation.............. 159,765,318 154,556,758
------------- -------------
Total liabilities.............. 734,296,015 718,961,424
------------- -------------
STOCKHOLDERS' EQUITY
--------------------
Common stock, $1 par value, authorized
20,000,000 shares; issued and outstanding,
11,548,083 shares in 2004 and 11,501,065
shares in 2003............................ 11,548,083 11,501,065
Additional paid-in capital................. 70,130,164 69,113,228
Accumulated other comprehensive income..... 25,490,475 22,285,668
Retained earnings.......................... 84,268,286 77,850,590
------------- -------------
Total stockholders' equity..... 191,437,008 180,750,551
------------- -------------
Total liabilities and stockholders' equity $925,733,023 $899,711,975
============= =============
Segment Information
(UNAUDITED)
Three Months Ended Property and
------------------ Casualty Parent
March 31, 2004 Insurance Reinsurance Company Consolidated
-------------- ----------------------------------------------
Premiums earned.........$61,360,228 $22,098,054 $- $83,458,282
Underwriting gain....... 4,040,349 1,173,866 - 5,214,215
Net investment income... 4,966,371 2,295,483 12,123 7,273,977
Other income............ 76,479 - - 76,479
Interest expense........ 193,125 84,975 - 278,100
Other expenses.......... 180,397 - 143,341 323,738
----------------------------------------------
Operating income
(loss) before income
tax expense (benefit) 8,709,677 3,384,374 (131,218) 11,962,833
Realized investment
gains.................. 289,967 110,560 - 400,527
----------------------------------------------
Income (loss) before
income tax expense
(benefit)............ $8,999,644 $3,494,934 $(131,218)$12,363,360
==============================================
Three Months Ended Property and
------------------ Casualty Parent
March 31, 2003 Insurance Reinsurance Company Consolidated
-------------- ----------------------------------------------
Premiums earned.........$59,205,804 $21,176,094 $- $80,381,898
Underwriting gain (loss) 4,470,091 (297,070) - 4,173,021
Net investment income... 5,550,937 2,245,755 $50,232 7,846,924
Other income............ 167,830 - - 167,830
Interest expense........ 339,987 145,979 - 485,966
Other expenses.......... 277,184 - 131,364 408,548
----------------------------------------------
Operating income
(loss) before income
tax expense (benefit) 9,571,687 1,802,706 (81,132) 11,293,261
Realized investment
losses................. (1,358,914) (390,871) - (1,749,785)
----------------------------------------------
Income (loss) before
income tax expense
(benefit)............ $8,212,773 $1,411,835 $(81,132) $9,543,476
==============================================
Property and Casualty
Insurance Reinsurance
Written premiums(a) 2004 2003 2004 2003
----------------------------------------------------------------------
Three months ended:
March 31,...$60,183,531 $60,022,622 $24,500,287 $23,301,452
Total
Written premiums(a) 2004 2003
----------------------------------------------
Three months ended:
March 31,...$84,683,818 $83,324,074
(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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