EMC Insurance Group Inc. Reports 2006 First Quarter Results.DES MOINES, Iowa “Des Moines” redirects here. For other uses, see Des Moines (disambiguation). Des Moines (pronounced /dɪˈmɔɪn/ in English, -- 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 2006 --Net Income Per Share -- $1.41 --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 -- $1.32 --GAAP Combined Ratio - 84.1% EMC Insurance Group Inc. (Nasdaq:EMCI) today reported record first quarter operating income of $1.32 per share for the first quarter ended March 31, 2006 compared to operating income of $0.74 per share for the first quarter of 2005(1). Net income, including realized investment gains/losses, was $19,264,000 ($1.41 per share) for the first quarter of 2006 compared to $10,503,000 ($0.77 per share) for the first quarter of 2005. "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
Premiums earned decreased 5.7 percent to $95,492,000 for the three months ended March 31, 2006 from $101,294,000 for the same period in 2005. The majority of this decrease is attributed to 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 and is associated with Employers Mutual Casualty Company's previously announced reduced participation in the Mutual Reinsurance Bureau (MRB MRB Malaysian Rubber Board MRB Material Review Board MRB Maintenance Review Board (Commercial Aircraft Industry and FAA) MRB Medical Review Board MRB Mortgage Revenue Bonds (secondary mortgage financial instrument) ) pool and the previously announced changes to the quota share For This article is about quota shares (shares of the quota). For other usages of quota, see, see . A quota share is a specified number or percentage of the allotment as a whole (quota), that is prescribed to each individual entity (see Non-tariff barriers to trade). agreement with Employers Mutual. The property and casualty insurance segment also experienced a slight decline in earned premiums Earned premium is the portion of an insurance written premium which is considered "earned" by the insurer, based on the part of the policy period that the insurance has been in effect, and during which the insurer has been exposed to loss. in the first quarter of 2006. On an overall basis, rate competition increased moderately in the property and casualty insurance marketplace during the first quarter of 2006 and management expects market conditions to remain competitive for the remainder of the year. Consequently, the Company's overall rate level is expected to decline moderately during 2006. Investment income increased 31.9 percent to $11,778,000 for the three months ended March 31, 2006 from $8,932,000 for the same period in 2005. This increase is primarily attributed to the fact that all of the cash received from Employers Mutual in the first quarter of 2005 in connection with the change in pool participation has been fully invested. As noted in the Company's April 20, 2006 press release, the Company experienced $11,250,000 ($7,313,000 or $0.54 per share after tax) of favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. development on prior years' direct case loss reserves stemming stemming - stemmer from final settlements of claims in the first quarter of 2006. However, in the financial information contained in this earnings release the Company is reporting $4,296,000 of favorable development on prior years' reserves in the property and casualty insurance segment for the first quarter of 2006. The reported amount of favorable development reflects an adjustment in the factors utilized to allocate To reserve a resource such as memory or disk. See memory allocation. the property and casualty insurance segment's incurred but not reported Incurred but not reported (IBNR) is a term in common use in general insurance. When a policy of general insurance is written it will typically cover a 12 month period from inception of the policy. (IBNR IBNR Incurred But Not Reported IBNR Interesting But Not Relevant ) reserve by accident year. This adjustment was implemented to better match the expected development of claims that occurred in prior accident years with the allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as of the IBNR reserve to those prior accident years. It is anticipated that this adjustment will help reduce the volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the historically experienced in the development of the Company's reserves. It is important to note that this adjustment in IBNR factors did not have any impact on first quarter net income. The only impact of this adjustment is that a greater amount of the March 31, 2006 IBNR reserve was allocated to prior accident years, and a smaller amount was allocated to the current accident year. Accordingly, the reported amount of favorable development experienced on prior years' reserves is less than what would have been reported had the factors not been adjusted. Conversely con·verse 1 intr.v. con·versed, con·vers·ing, con·vers·es 1. To engage in a spoken exchange of thoughts, ideas, or feelings; talk. See Synonyms at speak. 2. , the current accident year loss ratio is better than what would have been experienced had the factors not been adjusted. Catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). and storm losses declined to $2,140,000 ($0.10 per share after tax) in the first quarter of 2006 from $2,625,000 ($0.13 per share after tax) in the first quarter of 2005, despite fairly active weather systems. The Company's GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). combined ratio was 84.1 percent in the first quarter of 2006 compared to 94.6 percent in the first quarter of 2005. At March 31, 2006, 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: assets totaled $1.1 billion, including $.9 billion in the investment portfolio; stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. was $277.2 million; and net book value of the Company's stock was $20.24 per share, an increase of 5.4 percent from $19.20 per share at December December: see month. 31, 2005. The Company began expensing stock options in the first quarter of 2006 in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment". Stock option expense for the first quarter of 2006 was $55,000. The Company will host an earnings call in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with today's release. The teleconference will begin at 10:00 a.m. eastern daylight For other uses, see Daylight (disambiguation). Daylight or the light of day is the combination of all direct and indirect sunlight outdoors during the daytime (and perhaps twilight). time, April 27, 2006. Dial-in information for the call is toll-free 1-800-591-6945; passcode 79394780. The event will be archived and available for digital replay through May 4, 2006. The replay access information is toll-free 1-888-286-8010; passcode 46991018. A webcast of the teleconference will be presented by Thomson Financial Thomson Financial A major provider of information, analytical tools, and consulting services to the financial community. The firm, a division of Thomson Corporation, is best known to investors for its First Call segment, which publishes consensus earnings and can be accessed at http://my.ccbn.com or from the Company's investor relations Investor relations The process by which the corporation communicates with its investors. page at www.emcinsurance.com. The archived webcast will be available for one year. A transcript A generic term for any kind of copy, particularly an official or certified representation of the record of what took place in a court during a trial or other legal proceeding. A transcript of record of the teleconference will also be available on the Company's website shortly after the completion of the teleconference. 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 beliefs, assumptions and expectations of the Company's future performance, taking into account all information currently available to management. These beliefs, assumptions and expectations can change as the result of many possible events or factors, not all of which are known to management. If a change occurs, the Company's business, financial condition, liquidity, results of operations, plans and objectives may vary materially from those expressed in the forward-looking statements. 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; the adequacy of loss and settlement expense reserves; state and federal legislation and regulations; changes in our industry, interest rates or the performance of financial markets and the general economy; rating 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. (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 Consolidated Statements of Income 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 STATEMENTS OF INCOME - UNAUDITED
Property and
Casualty Parent
Quarter Ended March Insurance Reinsurance Company Consolidated
31, 2006
----------------------------------------------------------------------
Revenues:
--------
Premiums earned.... $77,742,771 $17,749,427 $- $95,492,198
Investment income,
net............... 8,663,944 3,069,831 44,671 11,778,446
Other income....... 108,560 - - 108,560
------------ ------------ --------- ------------
86,515,275 20,819,258 44,671 107,379,204
------------ ------------ --------- ------------
Losses and expenses:
---------------------
Losses and
settlement
expenses.......... 35,639,922 12,778,107 - 48,418,029
Dividends to
policyholders..... 991,718 - - 991,718
Amortization of
deferred policy
acquisition costs. 18,346,891 3,150,238 - 21,497,129
Other underwriting
expenses.......... 8,603,605 826,992 - 9,430,597
Interest expense... 193,125 84,975 - 278,100
Other expenses..... 259,907 2,015 187,815 449,737
------------ ------------ --------- ------------
64,035,168 16,842,327 187,815 81,065,310
------------ ------------ --------- ------------
Operating income
(loss) before
income taxes.... 22,480,107 3,976,931 (143,144) 26,313,894
------------ ------------ --------- ------------
Realized investment
gains............... 1,531,041 313,834 - 1,844,875
------------ ------------ --------- ------------
Income (loss)
before income
taxes........... 24,011,148 4,290,765 (143,144) 28,158,769
------------ ------------ --------- ------------
Income tax expense
(benefit):
---------------------
Current............ 7,988,138 1,397,967 (50,100) 9,336,005
Deferred........... (191,986) (249,109) - (441,095)
------------ ------------ --------- ------------
7,796,152 1,148,858 (50,100) 8,894,910
------------ ------------ --------- ------------
Net income (loss) $16,214,996 $3,141,907 $(93,044) $19,263,859
============ ============ ========= ============
Average shares
outstanding......... 13,662,936
Per Share Data:
---------------------
Net income (loss)
per share - basic
and diluted....... $1.19 $0.23 $(0.01) $1.41
Decrease in
provision for
insuredevents of
prior years (after
tax) (1).......... $0.20 $0.04 $- $0.24
Catastrophe and
storm losses
(after tax)....... $(0.09) $(0.01) $- $(0.10)
Dividends per share $0.16
Book value per
share............. $20.24
Effective tax rate... 31.6%
Net income as a
percent of beg. SH
equity.............. 29.4%
Other Information of
Interest:
---------------------
Written Premium.... $74,679,599 $13,449,914 $- $88,129,513
Decrease in
provision for
insured events of
prior years (1)... $(4,296,020) $(739,026) $- $(5,035,046)
Catastrophe and
storm losses...... $1,939,338 $200,770 $- $2,140,108
GAAP Combined Ratio:
---------------------
Loss ratio......... 45.8% 72.0% - 50.7%
Expense ratio...... 36.0% 22.4% - 33.4%
------------ ------------ --------- ------------
81.8% 94.4% - 84.1%
============ ============ ========= ============
(1) The reported amount of favorable development for the property and
casualty insurance segment reflects an adjustment in the factors
utilized to allocate the March 31, 2006 incurred but not reported
(IBNR) reserve by accident year.
Property and
Casualty Parent
Quarter Ended March Insurance Reinsurance Company Consolidated
31, 2005
----------------------------------------------------------------------
Revenues:
---------
Premiums earned.. $79,718,272 $21,575,798 $- $101,294,070
Investment
income, net..... 6,341,481 2,495,277 94,952 8,931,710
Other income..... 96,096 - - 96,096
------------- ------------ --------- -------------
86,155,849 24,071,075 94,952 110,321,876
------------- ------------ --------- -------------
Losses and
expenses:
----------
Losses and
settlement
expenses........ 47,130,911 15,712,097 - 62,843,008
Dividends to
policyholders... 1,550,859 - - 1,550,859
Amortization of
deferred policy
acquisition
costs........... 18,214,990 4,271,721 - 22,486,711
Other
underwriting
expenses........ 7,617,038 1,283,038 - 8,900,076
Interest expense. 193,125 84,975 - 278,100
Other expenses... 171,329 - 234,801 406,130
------------- ------------ --------- -------------
74,878,252 21,351,831 234,801 96,464,884
------------- ------------ --------- -------------
Operating
income (loss)
before income
taxes......... 11,277,597 2,719,244 (139,849) 13,856,992
------------- ------------ --------- -------------
Realized investment
gains (losses).... 867,114 (138,672) - 728,442
------------- ------------ --------- -------------
Income (loss)
before income
taxes......... 12,144,711 2,580,572 (139,849) 14,585,434
------------- ------------ --------- -------------
Income tax expense
(benefit):
-------------------
Current.......... 5,426,166 121,308 (69,081) 5,478,393
Deferred......... (1,856,022) 441,481 18,986 (1,395,555)
------------- ------------ --------- -------------
3,570,144 562,789 (50,095) 4,082,838
------------- ------------ --------- -------------
Net income
(loss)........ $8,574,567 $2,017,783 $(89,754) $10,502,596
============= ============ ========= =============
Average shares
outstanding....... 13,585,110
Per Share Data:
---------------
Net income (loss)
per share -
basic and
diluted......... $0.63 $0.15 $(0.01) $0.77
(Increase)
decrease in
provision for
insured events
of prior years
(after tax)..... $0.31 $(0.03) $- $0.28
Catastrophe and
storm losses
(after tax)..... $(0.09) $(0.04) $- $(0.13)
Dividends per
share........... $0.15
Book value per
share........... $17.11
Effective tax rate. 28.0%
Net income as a
percent of beg. SH
equity............ 18.4%
Other Information
of Interest:
-------------------
Written Premium.. $105,853,132 $21,234,503 $- $127,087,635
Increase
(decrease) in
provision for
insured events
of prior years.. $(6,593,093) $706,770 $- $(5,886,323)
Catastrophe and
storm losses.... $1,763,717 $861,585 $- $2,625,302
GAAP Combined
Ratio:
-------------------
Loss ratio....... 59.1% 72.8% - 62.0%
Expense ratio.... 34.4% 25.8% - 32.6%
------------- ------------ --------- -------------
93.5% 98.6% - 94.6%
============= ============ ========= =============
CONSOLIDATED BALANCE SHEETS - UNAUDITED March 31, December 31,
2006 2005
--------------- ---------------
ASSETS
------
Investments:
Fixed maturities:
Securities held-to-maturity, at
amortized cost (fair value
$15,353,679 and $18,287,704)...... $15,143,101 $17,927,478
Securities available-for-sale, at
fair value (amortized cost
$746,160,609 and $740,845,145).... 750,164,331 753,399,943
Fixed maturity securities on loan:
Securities held-to-maturity, at
amortized cost (fair value
$4,612,224 and $1,891,504)........ 4,587,167 1,866,928
Securities available-for-sale, at
fair value (amortized cost
$16,980,152 and $41,922,225)...... 16,668,813 41,656,150
Equity securities available-for-sale,
at fair value (cost $68,320,810 and
$66,115,755)........................ 99,803,323 93,343,172
Other long-term investments, at cost. 3,533,142 4,269,566
Short-term investments, at cost...... 49,341,576 37,345,456
--------------- ---------------
Total investments................ 939,241,453 949,808,693
Balances resulting from related party
transactions with
Employers Mutual:
Reinsurance receivables............ 45,407,661 46,372,087
Prepaid reinsurance premiums....... 4,908,325 4,846,084
Deferred policy acquisition costs.. 32,318,315 34,106,217
Defined benefit retirement plan,
prepaid asset..................... 5,051,276 5,633,370
Other assets....................... 5,167,254 2,281,025
Cash................................... 419,687 333,048
Accrued investment income.............. 11,114,241 10,933,046
Accounts receivable (net of allowance
for uncollectible accounts of $0 and
$0)................................... 146,756 211,595
Deferred income taxes.................. 15,469,901 13,509,369
Goodwill, at cost less accumulated
amortization of $2,616,234 and
$2,616,234............................ 941,586 941,586
Securities lending collateral.......... 22,027,138 44,705,501
--------------- ---------------
Total assets.....................$1,082,213,593 $1,113,681,621
=============== ===============
LIABILITIES
-----------
Balances resulting from related party
transactions with
Employers Mutual:
Losses and settlement expenses..... $537,484,844 $544,051,061
Unearned premiums.................. 153,057,598 160,693,288
Other policyholders' funds......... 4,768,526 5,359,116
Surplus notes payable.............. 36,000,000 36,000,000
Indebtedness to related party...... 15,870,270 19,899,329
Employee retirement plans.......... 14,105,913 13,681,388
Other liabilities.................. 13,746,609 21,764,259
Income taxes payable................... 7,905,511 5,644,516
Securities lending obligation.......... 22,027,138 44,705,501
--------------- ---------------
Total liabilities................ 804,966,409 851,798,458
--------------- ---------------
STOCKHOLDERS' EQUITY
--------------------
Common stock, $1 par value, authorized
20,000,000 shares; issued and
outstanding, 13,698,774 shares in 2006
and 13,642,705 shares in 2005......... 13,698,774 13,642,705
Additional paid-in capital............. 105,855,362 104,800,407
Accumulated other comprehensive income. 22,648,231 25,470,039
Retained earnings...................... 135,044,817 117,970,012
--------------- ---------------
Total stockholders' equity....... 277,247,184 261,883,163
--------------- ---------------
Total liabilities and
stockholders' equity............$1,082,213,593 $1,113,681,621
=============== ===============
The Company had total cash and invested assets with a carrying value
of $939.7 million and $950.1 million as of March 31, 2006 and
December 31, 2005, respectively. The following table summarizes the
Company's cash and invested assets as of the dates indicated:
March 31, 2006
------------------------------------------
Percent of
Amortized Fair Total at Carrying
($ in thousands) Cost Value Fair Value Value
---------- ---------- ---------- ---------
Fixed maturity securities
held-to-maturity........... $19,730 $19,966 2.1% $19,730
Fixed maturity securities
available-for-sale......... 763,141 766,833 81.6% 766,833
Equity securities available-
for-sale................... 68,321 99,803 10.6% 99,803
Cash........................ 420 420 - 420
Short-term investments...... 49,342 49,342 5.3% 49,342
Other long-term investments. 3,533 3,533 0.4% 3,533
---------- ---------- ---------- ---------
$904,487 $939,897 100.0% $939,661
========== ========== ========== =========
December 31, 2005
------------------------------------------
Percent of
Amortized Fair Total at Carrying
($ in thousands) Cost Value Fair Value Value
---------- ---------- ---------- ---------
Fixed maturity securities
held-to-maturity........... $19,794 $20,179 2.1% $19,794
Fixed maturity securities
available-for-sale......... 782,767 795,056 83.6% 795,056
Equity securities available-
for-sale................... 66,116 93,343 9.8% 93,343
Cash........................ 333 333 - 333
Short-term investments...... 37,346 37,346 4.0% 37,346
Other long-term investments. 4,270 4,270 0.5% 4,270
---------- ---------- ---------- ---------
$910,626 $950,527 100.0% $950,142
========== ========== ========== =========
The amortized cost and estimated fair values of fixed maturity and
equity securities at March 31, 2006 were as follows:
Held-to-Maturity
------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
($ in thousands) Cost Gains Losses Fair
Value
---------- ---------- ---------- ---------
U.S. treasury securities and
obligations of U.S.
government corporations and
agencies................... $19,004 $186 $- $19,190
Mortgage-backed securities.. 726 50 - 776
---------- ---------- ---------- ---------
Total securities held-
to-maturity............ $19,730 $236 $- $19,966
========== ========== ========== =========
Available-for-Sale
------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
($ in thousands) Cost Gains Losses Fair
Value
---------- ---------- ---------- ---------
U.S. treasury securities and
obligations of U.S.
government corporations and
agencies................... $371,392 $6 $7,928 $363,470
Obligations of states and
political subdivisions..... 252,786 8,507 226 261,067
Mortgage-backed securities.. 19,386 985 133 20,238
Public utility securities... 6,004 356 - 6,360
Debt securities issued by
foreign governments........ 7,010 77 93 6,994
Corporate securities........ 106,563 3,487 1,346 108,704
---------- ---------- ---------- ---------
Total fixed maturity
securities............. 763,141 13,418 9,726 766,833
---------- ---------- ---------- ---------
Common stocks............... 64,821 32,015 593 96,243
Non-redeemable preferred
stocks..................... 3,500 60 - 3,560
---------- ---------- ---------- ---------
Total equity securities. 68,321 32,075 593 99,803
---------- ---------- ---------- ---------
Total securities
available-for-sale..... $831,462 $45,493 $10,319 $866,636
========== ========== ========== =========
NET WRITTEN PREMIUMS
Three Months Ended March 31, 2006
---------------------------------------
Percent of
Percent of Increase/(Decrease)
Net in Net
Written Premiums Written Premiums
------------------- -------------------
Property and Casualty Insurance
(1)
Commercial Lines:
-------------------------------
Automobile............... 18.9% (3.6)%
Liability................ 18.5% 3.1%
Property................. 15.0% (1.3)%
Workers' Compensation.... 15.3% 1.5%
Other.................... 2.0% 14.3%
-------------------
Total.................. 69.7% 0.2%
Personal Lines:
-------------------------------
Automobile............... 6.9% (16.9)%
Property................. 4.9% (7.9)%
Liability................ 0.1% 2.3%
-------------------
Total.................. 11.9% (13.2)%
Reinsurance (2)................ 18.4% (20.5)%
-------------------
Total.................. 100.0%
===================
(1) Excludes $29,630,612 portfolio adjustment related to the January
1, 2005 change in the Company's aggregate participation in the
pooling arrangement.
(2) Excludes $3,440,024 negative portfolio adjustment related to the
January 1, 2006 reduced participation in the MRB pool.
|
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion