EMC Insurance Group Inc. Reports Record 2005 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 ):
Fourth Quarter 2005
-------------------
Net Income Per Share -- $1.40
Net Operating Income Per Share -- $1.34
GAAP Combined Ratio - 84.7 percent
Twelve Month Period Ending December 31, 2005
--------------------------------------------
Net Income Per Share -- $3.16
Net Operating Income Per Share -- $2.98
GAAP Combined Ratio - 95.7 percent
EMC Insurance Group Inc. (Nasdaq:EMCI) today reported record fourth quarter 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 $1.34 per share for the quarter ended December December: see month. 31, 2005, compared to an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $0.02 per share for the fourth quarter of 2004(1). Operating income for the year ended December 31, 2005 was a record $2.98 per share, compared to $0.87 per share for the same period in 2004. Net income, including realized investment gains/losses, was $19,017,000 ($1.40 per share) for the fourth quarter of 2005 compared to a net loss of $489,000 ($0.04 per share) for the fourth quarter of 2004. Net income for the year ended December 31, 2005 was $43,009,000 ($3.16 per share) compared to $13,185,000 ($1.10 per share) for the same period in 2004. "2005 was an outstanding year for EMC Insurance Group Inc.," 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
v. To moderate in force or intensity. mit  i·ga tion n. our hurricane hurricane, tropical cyclone in which winds attain speeds greater than 74 mi (119 km) per hr. Wind speeds reach over 190 mi (289 km) per hr in some hurricanes. losses through a properly structured 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. program. We credit our success to strategic planning Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy, including its capital and people. and strong
relationships with our agency partners."
Premiums earned increased 18.0 percent to $106,714,000 for the three months ended December 31, 2005 from $90,448,000 for the same period in 2004. For the year ended December 31, 2005, premiums earned increased 20.3 percent to $415,625,000 from $345,478,000 for the same period in 2004. These increases are primarily attributed to the 6.5 percentage point increase in the Company's aggregate participation interest in the EMC Insurance Companies pooling arrangement that became effective January January: see month. 1, 2005. As a result of this increase, the Company's aggregate participation in the pooling arrangement increased from 23.5 percent to 30.0 percent. The increase in premiums earned also reflects the impact of rate increases implemented in the property and casualty insurance business during 2004. On an overall basis, rate competition increased moderately in the property and casualty insurance marketplace during 2005; however, there were indications of more intense rate competition in select territories and lines of business. Market conditions are expected to remain competitive in 2006, but there will likely be price firming in certain lines of business and regions of the country that have hurricane exposures. Rate competition in the Midwestern Mid·west or Middle West A region of the north-central United States around the Great Lakes and the upper Mississippi Valley. It is generally considered to include Ohio, Indiana, Illinois, Michigan, Wisconsin, Minnesota, Iowa, Missouri, Kansas, and states, where the Company does most of its business, is expected to intensify in·ten·si·fy v. in·ten·si·fied, in·ten·si·fy·ing, in·ten·si·fies v.tr. 1. To make intense or more intense: somewhat in 2006 as insurance companies attempt to reduce their coastal exposures and replace that business with non-coastal exposures. Investment income increased 36.1 percent to $10,991,000 for the fourth quarter and 36.1 percent to $40,696,000 for the year ended December 31, 2005 from $8,078,000 and $29,900,000 for the same periods in 2004. These increases are primarily attributed to additional interest income earned on $107,801,000 of cash received from Employers Mutual Casualty Company in the first quarter of 2005 in connection with the change in the pooling arrangement. The Company experienced $6,460,000 ($0.31 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' reserves during the fourth quarter of 2005 compared to adverse development of $15,419,000 ($0.76 per share after tax) in the fourth quarter of 2004. For the year ended December 31, 2005, the Company had favorable development on prior years' reserves of $15,408,000 ($0.74 per share after tax) compared to adverse development of $20,138,000 ($1.10 per share after tax) for the same period in 2004. The large amount of adverse development experienced in the fourth quarter of 2004 was caused by a significant, but unanticipated, increase in case reserves in the property and casualty insurance segment that was precipitated by a heightened emphasis on case reserve adequacy. "Carried loss and settlement expense reserves are toward the high end of the range of actuarial ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin indications at December 31, 2005, very similar to our position at year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2004," stated President and CEO Bruce G. Kelley. "The favorable development on prior years' reserves during 2005 provides confirming evidence of our strong reserve position, and all of our analysis supports the conclusion that newly reported claims continue to be reserved at high levels of adequacy In his seminal work Aspects of the Theory of Syntax (1965), Noam Chomsky introduces a hierarchy of Levels of Adequacy for evaluating grammars (theories of specific languages) and metagrammars (theories of grammars). ." Catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). and storm losses, primarily associated with Hurricane Wilma Hurricane Wilma was the most intense hurricane ever recorded in the Atlantic basin. Exceeding the 21 storms of the 1933 season, Wilma was the twenty-second storm (including the subtropical storm discovered in reanalysis), thirteenth hurricane, sixth major hurricane, and fourth , amounted to $1,374,000 ($0.07 per share after tax) in the fourth quarter of 2005 compared to a benefit of $511,000 ($0.03 per share after tax) in the fourth quarter of 2004. For the year ended December 31, 2005, catastrophe and storm losses totaled $24,382,000 ($1.16 per share after tax) compared to $18,492,000 ($1.01 per share after tax) for the same period in 2004. Total losses attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to Hurricanes Katrina KATRINA Keeping All the Resources in New Orleans Alive KATRINA Krewe Aiding Trash Removal In the New Orleans Area , Rita, and Wilma, including the effect of reinsurance reinstatement Reinstatement The restoration of an insurance policy after it has lapsed for nonpayment of premiums. premiums and related commissions, amounted to $10,616,000 ($0.51 per share after tax). The Company's GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). combined ratio was 84.7 percent in the fourth quarter of 2005 compared to 110.8 percent in the fourth quarter of 2004. For the year ended December 31, 2005, the GAAP combined ratio was 95.7 percent compared to 104.9 percent for the same period in 2004. At December 31, 2005, 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 $949.8 million 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 $261.9 million; and net book value of the Company's stock was $19.20 per share, an increase of 14.0 percent from $16.84 per share at December 31, 2004. On January 26, 2006, management announced that it expects 2006 operating income to be within a range of $2.25 per share and $2.50 per share. This estimate is based on the anticipation The performance of an act or obligation before it is legally due. In patent law, the publication of the existence of an invention that has already been patented or has a patent pending, of continued competition for good business in the property and casualty insurance segment and a decline in earnings from our reinsurance segment due to 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 and our 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. Management reaffirms this estimate. The Company will hold an earnings teleconference call at 11:00 a.m. eastern standard time on February February: see month. 23, 2006 to allow securities analysts, shareholders and other interested parties the opportunity to hear management discuss the Company's quarterly and year end 2005 results as well as its expectations for 2006. Dial-in information for the call is toll-free 1-866-825-3354; passcode 53968912. The event will be archived and available for digital replay through March 2, 2006. The replay access information is toll-free 1-888-286-8010; passcode 92317275. Members of the news media, investors and the general public are invited to access a live webcast of the conference call via the Company's investor relations Investor relations The process by which the corporation communicates with its investors. page at www.emcinsurance.com or at www.thomsonone.com. The webcast will be archived and available for replay until February 22, 2007. 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 the Company uses the words "believe", "expect", "anticipate", "estimate", or similar expressions, it intends 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, the Company has 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
Property and
Casualty Parent
Quarter Ended Insurance Reinsurance Company Consolidated
December 31, 2005
----------------------------------------------------------------------
Revenues:
---------
Premiums earned.. $80,458,573 $26,255,605 $- $106,714,178
Investment
income, net..... 8,146,294 2,816,648 27,836 10,990,778
Other income..... 263,154 - - 263,154
------------- ------------ ---------- -------------
88,868,021 29,072,253 27,836 117,968,110
------------- ------------ ---------- -------------
Losses and
expenses:
----------
Losses and
settlement
expenses........ 37,952,070 13,997,001 - 51,949,071
Dividends to
policyholders... 2,783,798 - - 2,783,798
Amortization of
deferred policy
acquisition
costs........... 19,061,611 5,581,998 - 24,643,609
Other
underwriting
expenses........ 9,567,112 1,461,949 - 11,029,061
Interest
expense......... 193,125 84,975 - 278,100
Other expenses... 211,179 - 196,900 408,079
------------- ------------ ---------- -------------
69,768,895 21,125,923 196,900 91,091,718
------------- ------------ ---------- -------------
Operating
income (loss)
before income
taxes......... 19,099,126 7,946,330 (169,064) 26,876,392
------------- ------------ ---------- -------------
Realized investment
gains (losses).... 1,005,949 87,213 (5,625) 1,087,537
------------- ------------ ---------- -------------
Income (loss)
before income
taxes......... 20,105,075 8,033,543 (174,689) 27,963,929
------------- ------------ ---------- -------------
Income tax expense
(benefit):
------------------
Current.......... 7,089,272 1,885,103 (61,142) 8,913,233
Deferred......... (544,493) 578,119 - 33,626
------------- ------------ ---------- -------------
6,544,779 2,463,222 (61,142) 8,946,859
------------- ------------ ---------- -------------
Net income
(loss)........ $13,560,296 $5,570,321 $(113,547) $19,017,070
============= ============ ========== =============
Average shares
outstanding....... 13,627,946
Per Share Data:
---------------
Net income (loss)
per share -
basic and
diluted......... $1.00 $0.41 $(0.01) $1.40
Decrease in
provision for
insured events
of prior years
(after tax)..... $0.28 $0.03 $- $0.31
Catastrophe and
storm losses
(after tax)..... $- $(0.07) $- $(0.07)
Dividends per
share........... $0.16
Other Information
of Interest:
-----------------
Written Premium.. $64,664,586 $25,688,180 $- $90,352,766
Decrease in
provision for
insured events
of prior years.. $(5,932,452) $(527,061) $- $(6,459,513)
Catastrophe and
storm losses.... $(155,333) $1,528,936 $- $1,373,603
GAAP Combined
Ratio:
-------------
Loss ratio....... 47.2% 53.3% - 48.7%
Expense ratio.... 39.0% 26.8% - 36.0%
------------- ------------ ---------- -------------
86.2% 80.1% - 84.7%
============= ============ ========== =============
Property and
Casualty Parent
Quarter Ended Insurance Reinsurance Company Consolidated
December 31, 2004
----------------------------------------------------------------------
Revenues:
---------
Premiums earned.. $63,125,910 $27,321,991 $- $90,447,901
Investment
income, net..... 5,394,344 2,576,052 107,115 8,077,511
Other income..... 122,914 - - 122,914
------------- ------------ ---------- -------------
68,643,168 29,898,043 107,115 98,648,326
------------- ------------ ---------- -------------
Losses and
expenses:
----------
Losses and
settlement
expenses........ 59,663,037 9,842,983 - 69,506,020
Dividends to
policyholders... 1,487,442 - - 1,487,442
Amortization of
deferred policy
acquisition
costs........... 15,374,347 5,453,488 - 20,827,835
Other
underwriting
expenses........ 5,310,060 3,091,314 - 8,401,374
Interest
expense......... 193,125 84,975 - 278,100
Other expenses... (84,639) - 191,847 107,208
------------- ------------ ---------- -------------
81,943,372 18,472,760 191,847 100,607,979
------------- ------------ ---------- -------------
Operating
income (loss)
before income
taxes......... (13,300,204) 11,425,283 (84,732) (1,959,653)
------------- ------------ ---------- -------------
Realized investment
gains (losses).... (256,662) 6,223 - (250,439)
------------- ------------ ---------- -------------
Income (loss)
before income
taxes......... (13,556,866) 11,431,506 (84,732) (2,210,092)
------------- ------------ ---------- -------------
Income tax expense
(benefit):
------------------
Current.......... (3,238,074) 3,287,635 (17,885) 31,676
Deferred......... (2,202,494) 460,445 (10,911) (1,752,960)
------------- ------------ ---------- -------------
(5,440,568) 3,748,080 (28,796) (1,721,284)
------------- ------------ ---------- -------------
Net income
(loss)........ $(8,116,298) $7,683,426 $(55,936) $(488,808)
============= ============ ========== =============
Average shares
outstanding....... 13,152,209
Per Share Data:
---------------
Net income (loss)
per share -
basic and
diluted......... $(0.62) $0.58 $- $(0.04)
Increase in
provision for
insured events
of prior years
(after tax)..... $(0.69) $(0.07) $- $(0.76)
Catastrophe and
storm losses
(after tax)..... $(0.03) $0.06 $- $0.03
Dividends per
share........... $0.15
Other Information
of Interest:
-----------------
Written Premium.. $50,890,370 $27,323,673 $- $78,214,043
Increase in
provision for
insured events
of prior years.. $14,032,146 $1,386,879 $- $15,419,025
Catastrophe and
storm losses.... $647,749 $(1,158,313) $- $(510,564)
GAAP Combined
Ratio:
-------------
Loss ratio....... 94.5% 36.0% - 76.8%
Expense ratio.... 35.1% 31.3% - 34.0%
------------- ------------ ---------- -------------
129.6% 67.3% - 110.8%
============= ============ ========== =============
Property and
Casualty Parent
Year Ended Insurance Reinsurance Company Consolidated
December 31, 2005
----------------------------------------------------------------------
Revenues:
---------
Premiums earned..$321,164,542 $94,460,204 $- $415,624,746
Investment
income, net..... 29,694,641 10,783,434 218,168 40,696,243
Other income..... 656,846 - - 656,846
------------- ------------ ---------- -------------
351,516,029 105,243,638 218,168 456,977,835
------------- ------------ ---------- -------------
Losses and
expenses:
----------
Losses and
settlement
expenses........ 197,900,156 60,026,337 - 257,926,493
Dividends to
policyholders... 7,540,547 - - 7,540,547
Amortization of
deferred policy
acquisition
costs........... 72,765,822 19,635,071 - 92,400,893
Other
underwriting
expenses........ 33,773,900 6,285,514 - 40,059,414
Interest
expense......... 772,500 339,900 - 1,112,400
Other expenses... 821,511 - 840,920 1,662,431
------------- ------------ ---------- -------------
313,574,436 86,286,822 840,920 400,702,178
------------- ------------ ---------- -------------
Operating
income (loss)
before income
taxes......... 37,941,593 18,956,816 (622,752) 56,275,657
------------- ------------ ---------- -------------
Realized investment
gains (losses).... 3,803,585 36,205 (5,625) 3,834,165
------------- ------------ ---------- -------------
Income (loss)
before income
taxes......... 41,745,178 18,993,021 (628,377) 60,109,822
------------- ------------ ---------- -------------
Income tax expense
(benefit):
------------------
Current.......... 15,227,185 4,794,776 (239,779) 19,782,182
Deferred......... (3,073,446) 373,055 18,986 (2,681,405)
------------- ------------ ---------- -------------
12,153,739 5,167,831 (220,793) 17,100,777
------------- ------------ ---------- -------------
Net income
(loss)........ $29,591,439 $13,825,190 $(407,584) $43,009,045
============= ============ ========== =============
Average shares
outstanding....... 13,606,203
Per Share Data:
---------------
Net income (loss)
per share -
basic and
diluted......... $2.17 $1.02 $(0.03) $3.16
Decrease in
provision for
insured events
of prior years
(after tax)..... $0.71 $0.03 $- $0.74
Catastrophe and
storm losses
(after tax)..... $(0.90) $(0.26) $- $(1.16)
Dividends per
share........... $0.61
Book value per
share........... $19.20
Effective tax
rate.............. 28.4%
Net income as a
percent of beg. SH
equity............ 18.8%
Other Information
of Interest:
-----------------
Written Premium..$350,645,907 $92,588,093 $- $443,234,000
Decrease in
provision for
insured events
of prior years..$(14,808,375) $(599,528) $- $(15,407,903)
Catastrophe and
storm losses.... $18,967,149 $5,414,659 $- $24,381,808
GAAP Combined
Ratio:
-------------
Loss ratio....... 61.6% 63.5% - 62.1%
Expense ratio.... 35.5% 27.5% - 33.6%
------------- ------------ ---------- -------------
97.1% 91.0% - 95.7%
============= ============ ========== =============
Property and
Casualty Parent
Year Ended Insurance Reinsurance Company Consolidated
December 31, 2004
----------------------------------------------------------------------
Revenues:
---------
Premiums earned..$250,034,561 $95,443,900 $- $345,478,461
Investment
income, net..... 20,236,342 9,498,925 164,936 29,900,203
Other income..... 600,732 - - 600,732
------------- ------------ ---------- -------------
270,871,635 104,942,825 164,936 375,979,396
------------- ------------ ---------- -------------
Losses and
expenses:
----------
Losses and
settlement
expenses........ 196,460,047 53,346,163 - 249,806,210
Dividends to
policyholders... 4,478,169 - - 4,478,169
Amortization of
deferred policy
acquisition
costs........... 55,746,217 19,698,620 - 75,444,837
Other
underwriting
expenses........ 25,612,121 7,171,565 - 32,783,686
Interest
expense......... 772,500 339,900 - 1,112,400
Other expenses... 495,783 - 666,628 1,162,411
------------- ------------ ---------- -------------
283,564,837 80,556,248 666,628 364,787,713
------------- ------------ ---------- -------------
Operating
income (loss)
before income
taxes......... (12,693,202) 24,386,577 (501,692) 11,191,683
------------- ------------ ---------- -------------
Realized investment
gains............. 3,270,862 1,108,452 - 4,379,314
------------- ------------ ---------- -------------
Income (loss)
before income
taxes......... (9,422,340) 25,495,029 (501,692) 15,570,997
------------- ------------ ---------- -------------
Income tax expense
(benefit):
------------------
Current.......... (2,797,911) 7,748,202 (366,786) 4,583,505
Deferred......... (2,508,701) 120,315 191,195 (2,197,191)
------------- ------------ ---------- -------------
(5,306,612) 7,868,517 (175,591) 2,386,314
------------- ------------ ---------- -------------
Net income
(loss)........ $(4,115,728) $17,626,512 $(326,101) $13,184,683
============= ============ ========== =============
Average shares
outstanding....... 11,948,710
Per Share Data:
---------------
Net income (loss)
per share -
basic and
diluted......... $(0.35) $1.48 $(0.03) $1.10
(Increase)
decrease in
provision for
insured events
of prior years
(after tax)..... $(1.29) $0.19 $- $(1.10)
Catastrophe and
storm losses
(after tax)..... $(0.74) $(0.27) $- $(1.01)
Dividends per
share........... $0.60
Book value per
share........... $16.84
Effective tax
rate.............. 15.3%
Net income as a
percent of beg. SH
equity............ 7.3%
Other Information
of Interest:
-----------------
Written Premium..$254,266,763 $97,637,066 $- $351,903,829
Increase
(decrease) in
provision for
insured events
of prior years.. $23,738,375 $(3,599,941) $- $20,138,434
Catastrophe and
storm losses.... $13,480,858 $5,010,673 $- $18,491,531
GAAP Combined
Ratio:
-------------
Loss ratio....... 78.6% 55.9% - 72.3%
Expense ratio.... 34.3% 28.1% - 32.6%
------------- ------------ ---------- -------------
112.9% 84.0% - 104.9%
============= ============ ========== =============
CONSOLIDATED BALANCE SHEETS December 31, December 31,
2005 2004
--------------- -------------
ASSETS
------
Investments:
Fixed maturities:
Securities held-to-maturity, at
amortized cost (fair value
$18,287,704 and $16,908,726)....... $17,927,478 $15,895,607
Securities available-for-sale, at
fair value (amortized cost
$740,845,145 and $541,401,950)..... 753,399,943 565,000,931
Fixed maturity securities on loan:
Securities held-to-maturity, at
amortized cost (fair value
$1,891,504 and $13,684,880)........ 1,866,928 13,310,264
Securities available-for-sale, at
fair value (amortized cost
$41,922,225 and $54,389,046)....... 41,656,150 54,653,472
Equity securities available-for-sale,
at fair value (cost $66,115,755 and
$59,589,434)......................... 93,343,172 78,692,893
Other long-term investments, at cost.. 4,269,566 5,550,093
Short-term investments, at cost....... 37,345,456 46,238,853
--------------- -------------
Total investments................. 949,808,693 779,342,113
Balances resulting from related party
transactions with Employers Mutual:
Reinsurance receivables............. 46,372,087 26,316,358
Prepaid reinsurance premiums........ 4,846,084 3,682,676
Deferred policy acquisition costs... 34,106,217 27,940,583
Defined benefit retirement plan,
prepaid asset...................... 5,633,370 2,684,463
Other assets........................ 2,281,025 1,877,564
Cash.................................... 333,048 61,088
Accrued investment income............... 10,933,046 8,726,292
Accounts receivable (net of allowance
for uncollectible accounts of $0 and
$0).................................... 211,595 216,836
Income taxes recoverable................ - 3,399,485
Deferred income taxes................... 13,509,369 9,504,193
Goodwill, at cost less accumulated
amortization of $2,616,234 and
$2,616,234............................. 941,586 941,586
Securities lending collateral........... 44,705,501 70,122,695
--------------- -------------
Total assets...................... $1,113,681,621 $934,815,932
=============== =============
LIABILITIES
-----------
Balances resulting from related party
transactions with Employers Mutual:
Losses and settlement expenses...... $544,051,061 $429,677,302
Unearned premiums................... 160,693,288 131,589,365
Other policyholders' funds.......... 5,359,116 2,825,809
Surplus notes payable............... 36,000,000 36,000,000
Indebtedness to related party....... 19,899,329 6,058,848
Employee retirement plans........... 13,681,388 9,764,406
Other liabilities................... 21,764,259 20,304,475
Income taxes payable.................... 5,644,516 -
Securities lending obligation........... 44,705,501 70,122,695
--------------- -------------
Total liabilities................. 851,798,458 706,342,900
--------------- -------------
STOCKHOLDERS' EQUITY
--------------------
Common stock, $1 par value, authorized
20,000,000 shares; issued and
outstanding, 13,642,705 shares in 2005
and 13,568,945 shares in 2004.......... 13,642,705 13,568,945
Additional paid-in capital.............. 104,800,407 103,467,293
Accumulated other comprehensive income.. 25,470,039 27,928,463
Retained earnings....................... 117,970,012 83,508,331
--------------- -------------
Total stockholders' equity........ 261,883,163 228,473,032
--------------- -------------
Total liabilities and
stockholders' equity............. $1,113,681,621 $934,815,932
=============== =============
The Company had total cash and invested assets with a carrying value
of $950.1 million and $779.4 million as of December 31, 2005 and
December 31,2004, respectively. The following table summarizes the
Company's cash and invested assets as of the dates indicated:
December 31, 2005
------------------------------------------
Percent of
Amortized Fair Total at Carrying
($ in thousands) Cost Value Fair Value Value
---------- ---------- ---------- ---------
Fixed maturities held-to-
maturity................... $19,794 $20,179 2.1% $19,794
Fixed maturities 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% $950,142
========== ========== ========== =========
December 31, 2004
------------------------------------------
Percent of
Amortized Fair Total at Carrying
($ in thousands) Cost Value Fair Value Value
---------- ---------- ---------- ---------
Fixed maturities held-to-
maturity................... $29,206 $30,594 3.9% $29,206
Fixed maturities available-
for-sale................... 595,791 619,654 79.4% 619,654
Equity securities available-
for-sale................... 59,589 78,693 10.1% 78,693
Cash........................ 61 61 - 61
Short-term investments...... 46,239 46,239 5.9% 46,239
Other long-term
investments................ 5,550 5,550 0.7% 5,550
---------- ---------- ---------- ---------
$736,436 $780,791 100.0% $779,403
========== ========== ========== =========
The amortized cost and estimated fair values of fixed maturity and
equity securities at December 31, 2005 were as follows:
Held-to-Maturity
------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
($ in thousands) Cost Gains Losses Fair
Value
---------- ---------- ---------- ---------
U.S. treasury securities and
obligations of U.S.
government corporations and
agencies................... $19,011 $328 $- $19,339
Mortgage-backed securities.. 783 57 - 840
---------- ---------- ---------- ---------
Total securities held-to-
maturity................... $19,794 $385 $- $20,179
========== ========== ========== =========
Available-for-Sale
------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
($ in thousands) Cost Gains Losses Fair
Value
---------- ---------- ---------- ---------
U.S. treasury securities and
obligations of U.S.
government corporations and
agencies................... $387,278 $298 $4,221 $383,355
Obligations of states and
political subdivisions..... 250,975 10,383 42 261,316
Mortgage-backed securities.. 9,861 357 6 10,212
Public utilities............ 6,004 483 - 6,487
Debt securities issued by
foreign governments........ 7,044 98 16 7,126
Corporate securities........ 121,605 6,084 1,129 126,560
---------- ---------- ---------- ---------
Total fixed maturity
securities............... 782,767 17,703 5,414 795,056
---------- ---------- ---------- ---------
Common stocks............... 62,616 27,759 595 89,780
Non-redeemable preferred
stocks..................... 3,500 63 - 3,563
---------- ---------- ---------- ---------
Total equity securities... 66,116 27,822 595 93,343
---------- ---------- ---------- ---------
Total securities
available-for-sale..... $848,883 $45,525 $6,009 $888,399
========== ========== ========== =========
NET WRITTEN PREMIUMS
Three Months Ended Twelve Months Ended
December 31, 2005 December 31, 2005
-------------------- ------------------------
Percent of Percent of
Percent Increase/ Percent Increase/
of (Decrease) of (Decrease)
Net in Net Net in Net
Written Written Written Written
Premiums Premiums Premiums(a) Premiums(a)
--------- ---------- ----------- ------------
Property and Casualty
Insurance
Commercial Lines:
-----------------
Automobile.......... 15.8 % (0.6)% 17.4 % (2.0)%
Liability........... 14.6 % 6.0 % 16.3 % 4.0 %
Property............ 13.4 % 0.5 % 14.8 % 2.4 %
Workers'
Compensation....... 12.6 % (5.0)% 14.7 % (3.9)%
Other............... 2.2 % 31.0 % 1.9 % 24.7 %
--------- -----------
Total............. 58.6 % 1.1 % 65.1 % 0.6 %
Personal Lines:
---------------
Automobile.......... 7.1 % (16.4)% 6.9 % (13.2)%
Property............ 5.7 % (6.0)% 5.5 % (4.8)%
Liability........... 0.2 % 6.3 % 0.1 % 3.9 %
--------- -----------
Total............. 13.0 % (12.0)% 12.5 % (9.5)%
Reinsurance............. 28.4 % (6.0)% 22.4 % (5.2)%
--------- -----------
Total............. 100.0 % 100.0 %
========= ===========
(a) Excludes January 1, 2005 portfolio adjustment of $29,630,612
related to the change in the Company's aggregate participation in
the pooling arrangement.
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