EMC Insurance Group Inc. Reports 2015
Second Quarter and Six Month Results
Second Quarter Ended June 30, 2015
Operating Income Per Share - $0.32
Net Income Per Share - $0.42
Net Realized Investment Gains Per Share - $0.10
Catastrophe and Storm Losses Per Share - $0.58
Large Losses Per Share - $0.22
GAAP Combined Ratio - 101.1 percent
Six Months Ended June 30, 2015
Operating Income Per Share - $1.29
Net Income Per Share - $1.42
Net Realized Investment Gains Per Share - $0.13
Catastrophe and Storm Losses Per Share - $0.73
Large Losses Per Share - $0.35
GAAP Combined Ratio - 94.5 percent
NOTE: All prior year share and per share amounts have been adjusted to reflect the three-for-two stock split that was completed on June 23, 2015.
2015 Operating Income Guidance - $1.80 to $2.00 per share
DES MOINES, Iowa (August 6, 2015) - EMC Insurance Group Inc. (NASDAQ OMX/GS:EMCI) today reported operating income of $6.6 million ($0.32 per share) for the second quarter ended June 30, 2015, compared to an operating loss of $509,000 ($0.03 per share) for the second quarter of 20141. For the six months ended June 30, 2015, the Company reported operating income of $26.4 million ($1.29 per share), compared to $9.3 million ($0.46 per share) for the same period in 2014.
Net income, including realized investment gains and losses, totaled $8.7 million ($0.42 per share) for the second quarter of 2015, compared to $1.0 million ($0.05 per share) for the second quarter of 2014. For the six months ended June 30, 2015, the Company reported net income of $29.1 million ($1.42 per share), compared to $11.6 million ($0.58 per share) for the same period in 2014.
The Company’s GAAP combined ratio was 101.1 percent in the second quarter of 2015, compared to 109.6 percent in the second quarter of 2014. For the first six months of 2015, the Company’s GAAP combined ratio was 94.5 percent, compared to 103.9 percent in 2014.
“Second quarter operating results improved in both segments,” stated President and Chief Executive Officer Bruce G. Kelley. “This improvement, combined with record-breaking first quarter results, keeps us on track to achieve 2015 operating income within our guidance.
“The property and casualty insurance segment continues to achieve targeted rate level increases that exceed the industry average, helping to improve overall premium rate adequacy and drive organic premium growth. Maintaining retention levels above the industry average while achieving above industry
average rate level increases is a testament to the value of our 16 local branch offices and strong independent agency network,” concluded Kelley.
Premiums earned increased 8.0 percent to $144.6 million for the second quarter of 2015, from $134.0 million in the second quarter of 2014. In the property and casualty insurance segment, premiums earned increased 7.5 percent, with the majority of the increase attributable to rate level increases on renewal business, growth in insured exposures and an increase in retained policies. In the reinsurance segment, premiums earned increased 9.6 percent, primarily due to a significant increase in pro rata liability business. It is important to note that this large increase also reflects a premium adjustment that was made in the second quarter of 2014, whereby the renewal date of two large facility contracts was extended from May 1 to July 1. This had the effect of reducing premiums earned in the pro rata property line of business in the second quarter of 2014. For the first six months of 2015, premiums earned increased 6.1 percent (7.2 percent in the property and casualty insurance segment and 2.6 percent in the reinsurance segment).
Catastrophe and storm losses totaled $18.4 million ($0.58 per share after tax) in the second quarter of 2015, compared to $27.9 million ($0.90 per share after tax) in the second quarter of 2014. Second quarter 2015 catastrophe and storm losses accounted for 12.7 percentage points of the combined ratio, which is well below the Company’s most recent 10-year average of 18.4 percentage points for this period and the 20.9 percentage points experienced in the second quarter of 2014. For the first six months of 2015, catastrophe and storm losses totaled $23.0 million ($0.73 per share after tax), compared to $35.4 million ($1.14 per share after tax) in 2014. On a segment basis, catastrophe and storm losses amounted to $17.0 million ($0.53 per share after tax) and $18.7 million ($0.60 per share after tax) in the property and casualty insurance segment, and $1.5 million ($0.05 per share after tax) and $4.3 million ($0.13 per share after tax) in the reinsurance segment, for the three months and six months ended June 30, 2015, respectively.
The Company reported $3.1 million ($0.10 per share after tax) of favorable development on prior years’ reserves during the second quarter of 2015, compared to $6.6 million ($0.21 per share after tax) in the second quarter of 2014. For the first six months of 2015, favorable development totaled $17.7 million ($0.56 per share after tax), compared to $9.2 million ($0.30 per share after tax) in 2014. Development amounts can vary significantly from quarter to quarter and year to year depending on a number of factors, including the number of claims settled and the settlement terms, and should therefore not be considered a reliable factor in assessing the adequacy of the Company’s carried reserves. The most recent actuarial analysis of the Company’s carried reserves indicates that carried reserves remain within the top quartile of the range of reasonable reserves.
Large losses (which the Company defines as losses greater than $500,000 for the EMC Insurance Companies pool, excluding catastrophe and storm losses) decreased to $6.9 million ($0.22 per share after tax) in the second quarter of 2015 from $9.9 million ($0.32 per share after tax) in the second quarter of 2014. For the first six months of 2015, large losses decreased to $11.1 million ($0.35 per share after tax) from $14.1 million ($0.46 per share after tax) in 2014.
Net investment income increased 3.3 percent to $11.4 million for the second quarter of 2015, from $11.1 million in 2014 due to a higher average invested balance in fixed maturity securities and an increase in dividend income. Net investment income declined 1.2% to $22.6 million for the first six months of 2015, from $22.9 million for the same period in 2014; however, net investment income for the first six months of 2014 included approximately $442,000 that resulted from the early payoff of a commercial mortgage-backed security during the first quarter of 2014 that was purchased at a significant discount to par value, which accelerated the accretion of the discount to par value and therefore increased investment income. Excluding this amount, net investment income would have increased 0.7 percent for the first six months of 2015.
Net realized investment gains totaled $3.3 million ($0.10 per share after tax) and $4.1 million ($0.13 per share after tax) for the second quarter and first six months of 2015, compared to $2.3 million ($0.08 per share after tax) and $3.6 million ($0.12 per share after tax) for the same periods in 2014. Included in net realized investment gains reported for the second quarter and first six months of 2015 are $2.0 million and $3.4 million, respectively, of net realized investment losses attributed to declines in the carrying value of a limited partnership that helps to protect the Company from a sudden and significant decline in the value of its equity portfolio, compared to $820,000 and $1.2 million, respectively, for the same periods in 2014.
At June 30, 2015, consolidated assets totaled $1.5 billion, including $1.4 billion in the investment portfolio, and stockholders’ equity totaled $515.4 million, an increase of 2.5 percent from December 31, 2014. Book value of the Company’s stock increased 0.9 percent to $24.95 per share from $24.72 per share at December 31, 2014, but declined 2.7 percent from March 31, 2015 due to a reduction in unrealized gains on the investment portfolio. Book value excluding accumulated other comprehensive income increased to $21.78 per share from $20.70 per share at December 31, 2014.
Based on results for the first six months of 2015 and projections for the remainder of the year, management is reaffirming its 2015 operating income guidance in the range of $1.80 to $2.00 per share. This guidance is based on a projected GAAP combined ratio of 97.8 percent for the year and investment income consistent with the amount reported in 2014. The load for catastrophe and storm losses has been reduced to 9.5 points from the previous load of 11.0 points; however, the 1.5 point decline in the loss ratio attributable to this reduction was offset by increases in the settlement and acquisition expense ratios.
The Company will hold an earnings teleconference call at noon Eastern time on August 6, 2015 to allow securities analysts, stockholders and other interested parties the opportunity to hear management discuss the Company’s results for the quarter and six months ended June 30, 2015, as well as its expectations for the remainder of 2015. Dial-in information for the call is toll-free 1-877-407-9205 (International: 1-201-689-8054).
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 page at www.emcins.com/ir. The webcast will be archived and available for replay until November 6, 2015. A transcript of the teleconference will also be available on the Company’s website shortly after the completion of the teleconference.
About EMCI:
EMC Insurance Group Inc. is a publicly held insurance holding company with operations in property and casualty insurance and reinsurance, which was formed in 1974 and became publicly held in 1982. The Company’s common stock trades on the Global Select Market tier of the NASDAQ OMX Stock Market under the symbol EMCI. Additional information regarding EMC Insurance Group Inc. may be found at www.emcins.com/ir. EMCI’s parent company is Employers Mutual Casualty Company (EMCC). EMCI and EMCC, together with their subsidiary and affiliated companies, conduct operations under the trade name EMC Insurance Companies.
Cautionary Note Regarding Forward-Looking Statements:
The Private Securities Litigation Reform Act of 1995 provides issuers the opportunity to make cautionary statements regarding forward-looking statements. 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 the property and casualty insurance industry, interest rates or the performance of financial markets and the general economy; |
•rating agency actions;
•“other-than-temporary” investment impairment losses; and
| |
| • | other risks and uncertainties inherent to the Company’s business, including those discussed under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K. |
Management intends to identify forward-looking statements when using the words “believe,” “expect,” “anticipate,” “estimate,” “project,” or similar expressions. Undue reliance should not be placed on these forward-looking statements. The Company disclaims any obligation to update such statements or to announce publicly the results of any revisions that it may make to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
¹The Company prepares its public financial statements in conformity with accounting principles generally accepted in the Unites States of America (GAAP). Operating income/loss is a non-GAAP financial measure, calculated by excluding net realized investment gains/losses from net income/loss. The Company’s calculation of operating income/loss may differ from similar measures used by other companies, so investors should exercise caution when comparing the Company’s measure of operating income/loss to the measure of other companies. Management’s projected operating income guidance is also considered a non-GAAP financial measure.
Management believes operating income/loss 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 GAAP financial measure of net income/loss. Therefore, the Company has provided the following reconciliation of the non-GAAP financial measure of operating income/loss to the GAAP financial measure of net income. Management also uses non-GAAP financial measures for goal setting, determining employee and senior management awards and compensation, and evaluating performance.
The reconciliation of operating income to net income is as follows:
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | 2015 | | 2014 | | 2015 | | 2014 |
| ($ in thousands) | | | | | | | | |
| Operating income (loss) | | $ | 6,620 |
| | $ | (509 | ) | | $ | 26,441 |
| | $ | 9,266 |
|
| Net realized investment gains | | 2,128 |
| | 1,523 |
| | 2,637 |
| | 2,343 |
|
| Net income | | $ | 8,748 |
| | $ | 1,014 |
| | $ | 29,078 |
| | $ | 11,609 |
|
|
| | | | | | | | | | | | | | | | |
| | | | | | | | | |
| CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED | | | | | | |
| ($ in thousands, except share and per share amounts) | | | | | | | | |
| Quarter Ended June 30, 2015 | | Property and Casualty Insurance | | Reinsurance | | Parent Company | | Consolidated |
| Revenues: | | | | | | | | |
| Premiums earned | | $ | 111,254 |
| | $ | 33,351 |
| | $ | — |
| | $ | 144,605 |
|
| Investment income, net | | 8,150 |
| | 3,294 |
| | (3 | ) | | 11,441 |
|
| Other income | | 190 |
| | (702 | ) | | — |
| | (512 | ) |
| | | 119,594 |
| | 35,943 |
| | (3 | ) | | 155,534 |
|
| Losses and expenses: | | | | | | | | |
| Losses and settlement expenses | | 82,817 |
| | 19,316 |
| | — |
| | 102,133 |
|
| Dividends to policyholders | | 37 |
| | — |
| | — |
| | 37 |
|
| Amortization of deferred policy acquisition costs | | 18,888 |
| | 8,355 |
| | — |
| | 27,243 |
|
| Other underwriting expenses | | 16,024 |
| | 761 |
| | — |
| | 16,785 |
|
| Interest expense | | 85 |
| | — |
| | — |
| | 85 |
|
| Other expenses | | 166 |
| | — |
| | 484 |
| | 650 |
|
| | | 118,017 |
| | 28,432 |
| | 484 |
| | 146,933 |
|
| Operating income (loss) before income taxes | | 1,577 |
| | 7,511 |
| | (487 | ) | | 8,601 |
|
| Realized investment gains | | 2,277 |
| | 997 |
| | — |
| | 3,274 |
|
| Income (loss) before income taxes | | 3,854 |
| | 8,508 |
| | (487 | ) | | 11,875 |
|
| Income tax expense (benefit): | | | | | | | | |
| Current | | 185 |
| | 3,293 |
| | (170 | ) | | 3,308 |
|
| Deferred | | 367 |
| | (548 | ) | | — |
| | (181 | ) |
| | | 552 |
| | 2,745 |
| | (170 | ) | | 3,127 |
|
| Net income (loss) | | $ | 3,302 |
| | $ | 5,763 |
| | $ | (317 | ) | | $ | 8,748 |
|
| Average shares outstanding | | | | | | | | 20,611,286 |
|
| Per Share Data: | | | | | | | | |
| Net income (loss) per share - basic and diluted | | $ | 0.16 |
| | $ | 0.28 |
| | $ | (0.02 | ) | | $ | 0.42 |
|
| Catastrophe and storm losses (after tax) | | $ | 0.53 |
| | $ | 0.05 |
| | $ | — |
| | $ | 0.58 |
|
| Large losses* (after tax) | | $ | 0.22 |
| | $ | — |
| | $ | — |
| | $ | 0.22 |
|
| Reported favorable development experienced on prior years' reserves (after tax) | | $ | 0.01 |
| | $ | 0.09 |
| | $ | — |
| | $ | 0.10 |
|
| Dividends per share | | | | | | | | $ | 0.167 |
|
| Other Information of Interest: | | | | | | | | |
| Net written premiums | | $ | 120,811 |
| | $ | 31,340 |
| | $ | — |
| | $ | 152,151 |
|
| Catastrophe and storm losses | | $ | 16,970 |
| | $ | 1,451 |
| | $ | — |
| | $ | 18,421 |
|
| Large losses* | | $ | 6,891 |
| | $ | — |
| | $ | — |
| | $ | 6,891 |
|
| Reported favorable development experienced on prior years' reserves | | $ | (190 | ) | | $ | (2,947 | ) | | $ | — |
| | $ | (3,137 | ) |
| GAAP Ratios: | | | | | | | | |
| Loss and settlement expense ratio | | 74.4 | % | | 57.9 | % | | — |
| | 70.6 | % |
| Acquisition expense ratio | | 31.5 | % | | 27.3 | % | | — |
| | 30.5 | % |
| Combined ratio | | 105.9 | % | | 85.2 | % | | — |
| | 101.1 | % |
| | | | | | | | | |
| *Large losses are defined as losses greater than $500 for the EMC Insurance Companies pool, excluding catastrophe and storm losses. |
|
| | | | | | | | | | | | | | | | |
| | | | | | | | | |
| CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED | | | | | | |
| ($ in thousands, except share and per share amounts) | | | | | | | | |
| Quarter Ended June 30, 2014 | | Property and Casualty Insurance | | Reinsurance | | Parent Company | | Consolidated |
| Revenues: | | | | | | | | |
| Premiums earned | | $ | 103,517 |
| | $ | 30,435 |
| | $ | — |
| | $ | 133,952 |
|
| Investment income, net | | 7,972 |
| | 3,106 |
| | (2 | ) | | 11,076 |
|
| Other income | | 181 |
| | 181 |
| | — |
| | 362 |
|
| | | 111,670 |
| | 33,722 |
| | (2 | ) | | 145,390 |
|
| Losses and expenses: | | | | | | | | |
| Losses and settlement expenses | | 80,787 |
| | 25,059 |
| | — |
| | 105,846 |
|
| Dividends to policyholders | | 2,213 |
| | — |
| | — |
| | 2,213 |
|
| Amortization of deferred policy acquisition costs | | 18,011 |
| | 7,107 |
| | — |
| | 25,118 |
|
| Other underwriting expenses | | 13,485 |
| | 119 |
| | — |
| | 13,604 |
|
| Interest expense | | 85 |
| | — |
| | — |
| | 85 |
|
| Other expenses | | 234 |
| | — |
| | 363 |
| | 597 |
|
| | | 114,815 |
| | 32,285 |
| | 363 |
| | 147,463 |
|
| Operating income (loss) before income taxes | | (3,145 | ) | | 1,437 |
| | (365 | ) | | (2,073 | ) |
| Realized investment gains | | 1,568 |
| | 775 |
| | — |
| | 2,343 |
|
| Income (loss) before income taxes | | (1,577 | ) | | 2,212 |
| | (365 | ) | | 270 |
|
| Income tax expense (benefit): | | | | | | | | |
| Current | | (367 | ) | | 694 |
| | (129 | ) | | 198 |
|
| Deferred | | (770 | ) | | (172 | ) | | — |
| | (942 | ) |
| | | (1,137 | ) | | 522 |
| | (129 | ) | | (744 | ) |
| Net income (loss) | | $ | (440 | ) | | $ | 1,690 |
| | $ | (236 | ) | | $ | 1,014 |
|
| Average shares outstanding | | | | | | | | 20,206,458 |
|
| Per Share Data: | | | | | | | | |
| Net income (loss) per share - basic and diluted | | $ | (0.02 | ) | | $ | 0.08 |
| | $ | (0.01 | ) | | $ | 0.05 |
|
| Catastrophe and storm losses (after tax) | | $ | 0.69 |
| | $ | 0.21 |
| | $ | — |
| | $ | 0.90 |
|
| Large losses* (after tax) | | $ | 0.32 |
| | $ | — |
| | $ | — |
| | $ | 0.32 |
|
| Reported favorable development experienced on prior years' reserves (after tax) | | $ | 0.15 |
| | $ | 0.06 |
| | $ | — |
| | $ | 0.21 |
|
| Dividends per share | | | | | | | | $ | 0.153 |
|
| Other Information of Interest: | | | | | | | | |
| Net written premiums | | $ | 112,464 |
| | $ | 26,560 |
| | $ | — |
| | $ | 139,024 |
|
| Catastrophe and storm losses | | $ | 21,465 |
| | $ | 6,480 |
| | $ | — |
| | $ | 27,945 |
|
| Large losses* | | $ | 9,913 |
| | $ | — |
| | $ | — |
| | $ | 9,913 |
|
| Reported favorable development experienced on prior years' reserves | | $ | (4,740 | ) | | $ | (1,903 | ) | | $ | — |
| | $ | (6,643 | ) |
| GAAP Ratios: | | | | | | | | |
| Loss and settlement expense ratio | | 78.0 | % | | 82.3 | % | | — |
| | 79.0 | % |
| Acquisition expense ratio | | 32.6 | % | | 23.8 | % | | — |
| | 30.6 | % |
| Combined ratio | | 110.6 | % | | 106.1 | % | | — |
| | 109.6 | % |
| | | | | | | | | |
| *Large losses are defined as losses greater than $500 for the EMC Insurance Companies pool, excluding catastrophe and storm losses. |
|
| | | | | | | | | | | | | | | | |
| CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED | | | | | | |
| ($ in thousands, except share and per share amounts) | | | | | | | | |
| Six Months Ended June 30, 2015 | | Property and Casualty Insurance | | Reinsurance | | Parent Company | | Consolidated |
| Revenues: | | | | | | | | |
| Premiums earned | | $ | 219,459 |
| | $ | 63,877 |
| | $ | — |
| | $ | 283,336 |
|
| Investment income, net | | 16,176 |
| | 6,478 |
| | (7 | ) | | 22,647 |
|
| Other income | | 372 |
| | 731 |
| | — |
| | 1,103 |
|
| | | 236,007 |
| | 71,086 |
| | (7 | ) | | 307,086 |
|
| Losses and expenses: | | | | | | | | |
| Losses and settlement expenses | | 139,492 |
| | 38,426 |
| | — |
| | 177,918 |
|
| Dividends to policyholders | | 2,937 |
| | — |
| | — |
| | 2,937 |
|
| Amortization of deferred policy acquisition costs | | 37,267 |
| | 15,417 |
| | — |
| | 52,684 |
|
| Other underwriting expenses | | 32,197 |
| | 2,109 |
| | — |
| | 34,306 |
|
| Interest expense | | 169 |
| | — |
| | — |
| | 169 |
|
| Other expenses | | 372 |
| | — |
| | 945 |
| | 1,317 |
|
| | | 212,434 |
| | 55,952 |
| | 945 |
| | 269,331 |
|
| Operating income (loss) before income taxes | | 23,573 |
| | 15,134 |
| | (952 | ) | | 37,755 |
|
| Realized investment gains | | 2,977 |
| | 1,080 |
| | — |
| | 4,057 |
|
| Income (loss) before income taxes | | 26,550 |
| | 16,214 |
| | (952 | ) | | 41,812 |
|
| Income tax expense (benefit): | | | | | | | | |
| Current | | 7,770 |
| | 5,076 |
| | (333 | ) | | 12,513 |
|
| Deferred | | 77 |
| | 144 |
| | — |
| | 221 |
|
| | | 7,847 |
| | 5,220 |
| | (333 | ) | | 12,734 |
|
| Net income (loss) | | $ | 18,703 |
| | $ | 10,994 |
| | $ | (619 | ) | | $ | 29,078 |
|
| Average shares outstanding | | | | | | | | 20,523,794 |
|
| Per Share Data: | | | | | | | | |
| Net income (loss) per share - basic and diluted | | $ | 0.91 |
| | $ | 0.54 |
| | $ | (0.03 | ) | | $ | 1.42 |
|
| Catastrophe and storm losses (after tax) | | $ | 0.60 |
| | $ | 0.13 |
| | $ | — |
| | $ | 0.73 |
|
| Large losses* (after tax) | | $ | 0.35 |
| | $ | — |
| | $ | — |
| | $ | 0.35 |
|
| Reported favorable development experienced on prior years' reserves (after tax) | | $ | 0.30 |
| | $ | 0.26 |
| | $ | — |
| | $ | 0.56 |
|
| Dividends per share | | | | | | | | $ | 0.333 |
|
| Book value per share | | | | | | | | $ | 24.95 |
|
| Effective tax rate | | | | | | | | 30.5 | % |
| Annualized net income as a percent of beg. SH equity | | | | | | | | 11.6 | % |
| Other Information of Interest: | | | | | | | | |
| Net written premiums | | $ | 229,607 |
| | $ | 65,468 |
| | $ | — |
| | $ | 295,075 |
|
| Catastrophe and storm losses | | $ | 18,731 |
| | $ | 4,260 |
| | $ | — |
| | $ | 22,991 |
|
| Large losses* | | $ | 11,149 |
| | $ | — |
| | $ | — |
| | $ | 11,149 |
|
| Reported favorable development experienced on prior years' reserves | | $ | (9,455 | ) | | $ | (8,275 | ) | | $ | — |
| | $ | (17,730 | ) |
| GAAP Ratios: | | | | | | | | |
| Loss and settlement expense ratio | | 63.6 | % | | 60.2 | % | | — |
| | 62.8 | % |
| Acquisition expense ratio | | 33.0 | % | | 27.4 | % | | — |
| | 31.7 | % |
| Combined ratio | | 96.6 | % | | 87.6 | % | | — |
| | 94.5 | % |
| | | | | | | | | |
| *Large losses are defined as losses greater than $500 for the EMC Insurance Companies pool, excluding catastrophe and storm losses. |
|
| | | | | | | | | | | | | | | | |
| CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED | | | | | | |
| ($ in thousands, except share and per share amounts) | | | | | | | | |
| Six Months Ended June 30, 2014 | | Property and Casualty Insurance | | Reinsurance | | Parent Company | | Consolidated |
| Revenues: | | | | | | | | |
| Premiums earned | | $ | 204,764 |
| | $ | 62,268 |
| | $ | — |
| | $ | 267,032 |
|
| Investment income, net | | 16,588 |
| | 6,349 |
| | (6 | ) | | 22,931 |
|
| Other income | | 382 |
| | 14 |
| | — |
| | 396 |
|
| | | 221,734 |
| | 68,631 |
| | (6 | ) | | 290,359 |
|
| Losses and expenses: | | | | | | | | |
| Losses and settlement expenses | | 148,513 |
| | 46,302 |
| | — |
| | 194,815 |
|
| Dividends to policyholders | | 3,929 |
| | — |
| | — |
| | 3,929 |
|
| Amortization of deferred policy acquisition costs | | 35,752 |
| | 13,981 |
| | — |
| | 49,733 |
|
| Other underwriting expenses | | 28,024 |
| | 1,010 |
| | — |
| | 29,034 |
|
| Interest expense | | 169 |
| | — |
| | — |
| | 169 |
|
| Other expenses | | 408 |
| | — |
| | 717 |
| | 1,125 |
|
| | | 216,795 |
| | 61,293 |
| | 717 |
| | 278,805 |
|
| Operating income (loss) before income taxes | | 4,939 |
| | 7,338 |
| | (723 | ) | | 11,554 |
|
| Realized investment gains | | 2,579 |
| | 1,026 |
| | — |
| | 3,605 |
|
| Income (loss) before income taxes | | 7,518 |
| | 8,364 |
| | (723 | ) | | 15,159 |
|
| Income tax expense (benefit): | | | | | | | | |
| Current | | 1,850 |
| | 2,704 |
| | (254 | ) | | 4,300 |
|
| Deferred | | (444 | ) | | (306 | ) | | — |
| | (750 | ) |
| | | 1,406 |
| | 2,398 |
| | (254 | ) | | 3,550 |
|
| Net income (loss) | | $ | 6,112 |
| | $ | 5,966 |
| | $ | (469 | ) | | $ | 11,609 |
|
| Average shares outstanding | | | | | | | | 20,114,777 |
|
| Per Share Data: | | | | | | | | |
| Net income (loss) per share - basic and diluted | | $ | 0.30 |
| | $ | 0.30 |
| | $ | (0.02 | ) | | $ | 0.58 |
|
| Catastrophe and storm losses (after tax) | | $ | 0.92 |
| | $ | 0.22 |
| | $ | — |
| | $ | 1.14 |
|
| Large losses* (after tax) | | $ | 0.46 |
| | $ | — |
| | $ | — |
| | $ | 0.46 |
|
| Reported favorable development experienced on prior years' reserves (after tax) | | $ | 0.18 |
| | $ | 0.12 |
| | $ | — |
| | $ | 0.30 |
|
| Dividends per share | | | | | | | | $ | 0.307 |
|
| Book value per share | | | | | | | | $ | 24.03 |
|
| Effective tax rate | | | | | | | | 23.4 | % |
| Annualized net income as a percent of beg. SH equity | | | | | | | | 5.1 | % |
| Other Information of Interest: | | | | | | | | |
| Net written premiums | | $ | 214,977 |
| | $ | 59,452 |
| | $ | — |
| | $ | 274,429 |
|
| Catastrophe and storm losses | | $ | 28,437 |
| | $ | 6,920 |
| | $ | — |
| | $ | 35,357 |
|
| Large losses* | | $ | 14,109 |
| | $ | — |
| | $ | — |
| | $ | 14,109 |
|
| Reported favorable development experienced on prior years' reserves | | $ | (5,679 | ) | | $ | (3,552 | ) | | $ | — |
| | $ | (9,231 | ) |
| GAAP Ratios: | | | | | | | | |
| Loss and settlement expense ratio | | 72.5 | % | | 74.4 | % | | — |
| | 73.0 | % |
| Acquisition expense ratio | | 33.1 | % | | 24.0 | % | | — |
| | 30.9 | % |
| Combined ratio | | 105.6 | % | | 98.4 | % | | — |
| | 103.9 | % |
| | | | | | | | | |
| *Large losses are defined as losses greater than $500 for the EMC Insurance Companies pool, excluding catastrophe and storm losses. |
|
| | | | | | | | |
| CONSOLIDATED BALANCE SHEETS | | | | |
| | | June 30,
2015 | | December 31,
2014 |
| ($ in thousands, except share and per share amounts) | | (Unaudited) | |
|
| ASSETS | | | | |
| Investments: | | | | |
| Fixed maturity securities available-for-sale, at fair value (amortized cost $1,122,459 and $1,080,006) | | $ | 1,154,962 |
| | $ | 1,127,499 |
|
| Equity securities available-for-sale, at fair value (cost $135,044 and $123,972) | | 199,286 |
| | 197,036 |
|
| Other long-term investments | | 8,109 |
| | 6,227 |
|
| Short-term investments | | 32,758 |
| | 53,262 |
|
| Total investments | | 1,395,115 |
| | 1,384,024 |
|
| | | | | |
| Cash | | 349 |
| | 383 |
|
| Reinsurance receivables due from affiliate | | 25,933 |
| | 28,603 |
|
| Prepaid reinsurance premiums due from affiliate | | 6,482 |
| | 8,865 |
|
| Deferred policy acquisition costs (affiliated $42,239 and $38,930) | | 42,404 |
| | 39,343 |
|
| Prepaid pension and postretirement benefits due from affiliate | | 17,056 |
| | 17,360 |
|
| Accrued investment income | | 10,609 |
| | 10,295 |
|
| Amounts receivable under reverse repurchase agreements | | 16,850 |
| | — |
|
| Accounts receivable | | 849 |
| | 1,767 |
|
| Goodwill | | 942 |
| | 942 |
|
| Other assets (affiliated $3,175 and $4,900) | | 3,481 |
| | 6,238 |
|
| Total assets | | $ | 1,520,070 |
| | $ | 1,497,820 |
|
| | | | | |
| LIABILITIES | | | | |
| Losses and settlement expenses (affiliated $664,135 and $650,652) | | $ | 671,586 |
| | $ | 661,309 |
|
| Unearned premiums (affiliated $241,397 and $230,460) | | 242,017 |
| | 232,093 |
|
| Other policyholders' funds (all affiliated) | | 8,600 |
| | 10,153 |
|
| Surplus notes payable to affiliate | | 25,000 |
| | 25,000 |
|
| Amounts due affiliate to settle inter-company transaction balances | | 1,127 |
| | 8,559 |
|
| Pension benefits payable to affiliate | | 4,018 |
| | 4,162 |
|
| Income taxes payable | | 3,911 |
| | 3 |
|
| Deferred income taxes | | 20,190 |
| | 28,654 |
|
| Other liabilities (affiliated $20,520 and $23,941) | | 28,227 |
| | 25,001 |
|
| Total liabilities | | 1,004,676 |
| | 994,934 |
|
| | | | | |
| STOCKHOLDERS' EQUITY | | | | |
| Common stock, $1 par value, authorized 30,000,000 shares; issued and outstanding, 20,653,399 shares in 2015 and 20,344,409 shares in 2014 | | 20,653 |
| | 20,344 |
|
| Additional paid-in capital | | 105,933 |
| | 99,891 |
|
| Accumulated other comprehensive income | | 65,533 |
| | 81,662 |
|
| Retained earnings | | 323,275 |
| | 300,989 |
|
| Total stockholders' equity | | 515,394 |
| | 502,886 |
|
| Total liabilities and stockholders' equity | | $ | 1,520,070 |
| | $ | 1,497,820 |
|
|
| | | | | | | | | | | | | | | | | | | | | | |
| LOSS AND SETTLEMENT EXPENSE BY LINE OF BUSINESS | | | | |
| | | |
| | | Three Months Ended June 30, |
| | | 2015 | | 2014 |
| ($ in thousands) | | Premiums earned | | Losses and settlement expenses | | Loss and settlement expense ratio | | Premiums earned | | Losses and settlement expenses | | Loss and settlement expense ratio |
| Property and casualty insurance | | | | | | | | | | | | |
| Commercial lines: | | | | | | | | | | | | |
| Automobile | | $ | 26,222 |
| | $ | 20,437 |
| | 77.9 | % | | $ | 23,855 |
| | $ | 18,376 |
| | 77.0 | % |
| Property | | 25,926 |
| | 22,029 |
| | 85.0 | % | | 23,328 |
| | 23,688 |
| | 101.5 | % |
| Workers' compensation | | 23,006 |
| | 15,982 |
| | 69.5 | % | | 21,910 |
| | 13,137 |
| | 60.0 | % |
| Liability | | 23,087 |
| | 13,006 |
| | 56.3 | % | | 21,055 |
| | 12,470 |
| | 59.2 | % |
| Other | | 2,046 |
| | 349 |
| | 17.1 | % | | 1,812 |
| | 63 |
| | 3.5 | % |
| Total commercial lines | | 100,287 |
| | 71,803 |
| | 71.6 | % | | 91,960 |
| | 67,734 |
| | 73.7 | % |
| | | | | | | | | | | | | |
| Personal lines: | | | | | | | | | | | | |
| Automobile | | 5,779 |
| | 4,843 |
| | 83.8 | % | | 6,304 |
| | 5,320 |
| | 84.4 | % |
| Homeowners | | 5,188 |
| | 6,171 |
| | 118.9 | % | | 5,253 |
| | 7,733 |
| | 147.1 | % |
| Total personal lines | | 10,967 |
| | 11,014 |
| | 100.4 | % | | 11,557 |
| | 13,053 |
| | 112.9 | % |
| Total property and casualty insurance | | $ | 111,254 |
| | $ | 82,817 |
| | 74.4 | % | | $ | 103,517 |
| | $ | 80,787 |
| | 78.0 | % |
| | | | | | | | | | | | | |
| Reinsurance | | | | | | | | | | | | |
| Pro rata reinsurance: | | | | | | | | | | | | |
| Multiline | | $ | 2,156 |
| | $ | (22 | ) | | (1.0 | )% | | $ | 3,267 |
| | $ | 1,993 |
| | 61.0 | % |
| Property | | 3,859 |
| | 3,229 |
| | 83.7 | % | | 1,063 |
| | 2,853 |
| | 268.3 | % |
| Liability | | 5,367 |
| | 3,424 |
| | 63.8 | % | | 2,721 |
| | 2,771 |
| | 101.8 | % |
| Marine | | 3,430 |
| | (2,558 | ) | | (74.6 | )% | | 4,837 |
| | 2,081 |
| | 43.0 | % |
| Total pro rata reinsurance | | 14,812 |
| | 4,073 |
| | 27.5 | % | | 11,888 |
| | 9,698 |
| | 81.6 | % |
| | | | | | | | | | | | | |
| Excess of loss reinsurance: | | | | | | | | | | | | |
| Property | | 15,714 |
| | 10,577 |
| | 67.3 | % | | 15,800 |
| | 14,141 |
| | 89.5 | % |
| Liability | | 2,825 |
| | 4,666 |
| | 165.1 | % | | 2,747 |
| | 1,220 |
| | 44.4 | % |
| Total excess of loss reinsurance | | 18,539 |
| | 15,243 |
| | 82.2 | % | | 18,547 |
| | 15,361 |
| | 82.8 | % |
| Total reinsurance | | $ | 33,351 |
| | $ | 19,316 |
| | 57.9 | % | | $ | 30,435 |
| | $ | 25,059 |
| | 82.3 | % |
| | | | | | | | | | | | | |
| Consolidated | | $ | 144,605 |
| | $ | 102,133 |
| | 70.6 | % | | $ | 133,952 |
| | $ | 105,846 |
| | 79.0 | % |
|
| | | | | | | | | | | | | | | | | | | | | | |
| LOSS AND SETTLEMENT EXPENSE BY LINE OF BUSINESS | | | | |
| | | | | | | | | | | | | |
| | | Six Months Ended June 30, |
| | | 2015 | | 2014 |
| ($ in thousands) | | Premiums earned | | Losses and settlement expenses | | Loss and settlement expense ratio | | Premiums earned | | Losses and settlement expenses | | Loss and settlement expense ratio |
| Property and casualty insurance | | | | | | | | | | | | |
| Commercial lines: | | | | | | | | | | | | |
| Automobile | | $ | 51,618 |
| | $ | 37,288 |
| | 72.2 | % | | $ | 46,657 |
| | $ | 34,890 |
| | 74.8 | % |
| Property | | 50,992 |
| | 34,362 |
| | 67.4 | % | | 46,645 |
| | 39,700 |
| | 85.1 | % |
| Workers' compensation | | 45,373 |
| | 27,493 |
| | 60.6 | % | | 42,963 |
| | 26,549 |
| | 61.8 | % |
| Liability | | 45,503 |
| | 23,942 |
| | 52.6 | % | | 41,510 |
| | 24,507 |
| | 59.0 | % |
| Other | | 4,012 |
| | 446 |
| | 11.1 | % | | 3,591 |
| | 485 |
| | 13.5 | % |
| Total commercial lines | | 197,498 |
| | 123,531 |
| | 62.5 | % | | 181,366 |
| | 126,131 |
| | 69.5 | % |
| | | | | | | | | | | | | |
| Personal lines: | | | | | | | | | | | | |
| Automobile | | 11,596 |
| | 7,296 |
| | 62.9 | % | | 12,715 |
| | 10,186 |
| | 80.1 | % |
| Homeowners | | 10,365 |
| | 8,665 |
| | 83.6 | % | | 10,683 |
| | 12,196 |
| | 114.2 | % |
| Total personal lines | | 21,961 |
| | 15,961 |
| | 72.7 | % | | 23,398 |
| | 22,382 |
| | 95.7 | % |
| Total property and casualty insurance | | $ | 219,459 |
| | $ | 139,492 |
| | 63.6 | % | | $ | 204,764 |
| | $ | 148,513 |
| | 72.5 | % |
| | | | | | | | | | | | | |
| Reinsurance | | | | | | | | | | | | |
| Pro rata reinsurance: | | | | | | | | | | | | |
| Multiline | | $ | 3,394 |
| | $ | 433 |
| | 12.8 | % | | $ | 4,331 |
| | $ | 2,613 |
| | 60.3 | % |
| Property | | 7,715 |
| | 9,257 |
| | 120.0 | % | | 7,307 |
| | 6,274 |
| | 85.9 | % |
| Liability | | 9,168 |
| | 5,564 |
| | 60.7 | % | | 5,513 |
| | 3,694 |
| | 67.0 | % |
| Marine | | 6,840 |
| | (1,453 | ) | | (21.2 | )% | | 8,219 |
| | 3,124 |
| | 38.0 | % |
| Total pro rata reinsurance | | 27,117 |
| | 13,801 |
| | 50.9 | % | | 25,370 |
| | 15,705 |
| | 61.9 | % |
| | | | | | | | | | | | | |
| Excess of loss reinsurance: | | | | | | | | | | | | |
| Property | | 30,176 |
| | 18,517 |
| | 61.4 | % | | 31,259 |
| | 31,132 |
| | 99.6 | % |
| Liability | | 6,584 |
| | 6,108 |
| | 92.8 | % | | 5,639 |
| | (535 | ) | | (9.5 | )% |
| Total excess of loss reinsurance | | 36,760 |
| | 24,625 |
| | 67.0 | % | | 36,898 |
| | 30,597 |
| | 82.9 | % |
| Total reinsurance | | $ | 63,877 |
| | $ | 38,426 |
| | 60.2 | % | | $ | 62,268 |
| | $ | 46,302 |
| | 74.4 | % |
| | | | | | | | | | | | | |
| Consolidated | | $ | 283,336 |
| | $ | 177,918 |
| | 62.8 | % | | $ | 267,032 |
| | $ | 194,815 |
| | 73.0 | % |
|
| | | | | | | | | | | | | | | | |
| NET WRITTEN PREMIUMS | | | | | | | | | | |
| | | Three Months Ended
June 30, 2015 | | Three Months Ended June 30, 2014 | | |
| ($ in thousands) | | Written premiums | | Percent of net written premiums | | Written premiums | | Percent of net written premiums | | Change in net written premiums |
| Property and casualty insurance | | | | | | | | | | |
| Commercial lines: | | | | | | | | | | |
| Automobile | | $ | 30,690 |
| | 20.2 | % | | $ | 27,617 |
| | 19.9 | % | | 11.1% |
| Property | | 28,407 |
| | 18.7 | % | | 25,972 |
| | 18.7 | % | | 9.4% |
| Workers' compensation | | 22,289 |
| | 14.6 | % | | 21,323 |
| | 15.3 | % | | 4.5% |
| Liability | | 25,419 |
| | 16.7 | % | | 23,124 |
| | 16.6 | % | | 9.9% |
| Other | | 2,238 |
| | 1.5 | % | | 2,150 |
| | 1.6 | % | | 4.1% |
| Total commercial lines | | 109,043 |
| | 71.7 | % | | 100,186 |
| | 72.1 | % | | 8.8% |
| | | | | | | | | | | |
| Personal lines: | | | | | | | | | | |
| Automobile | | 6,043 |
| | 4.0 | % | | 6,501 |
| | 4.7 | % | | (7.0)% |
| Homeowners | | 5,725 |
| | 3.7 | % | | 5,777 |
| | 4.1 | % | | (0.9)% |
| Total personal lines | | 11,768 |
| | 7.7 | % | | 12,278 |
| | 8.8 | % | | (4.2)% |
| Total property and casualty insurance | | $ | 120,811 |
| | 79.4 | % | | $ | 112,464 |
| | 80.9 | % | | 7.4% |
| | | | | | | | | | | |
| Reinsurance | | | | | | | | | | |
| Pro rata reinsurance: | | | | | | | | | | |
| Multiline | | $ | 1,079 |
| | 0.7 | % | | $ | 2,005 |
| | 1.4 | % | | (46.2)% |
| Property | | 2,802 |
| | 1.8 | % | | 82 |
| | 0.1 | % | | 3,340.1% |
| Liability | | 7,379 |
| | 4.9 | % | | 3,893 |
| | 2.8 | % | | 89.5% |
| Marine | | 2,077 |
| | 1.4 | % | | 2,404 |
| | 1.7 | % | | (13.6)% |
| Total pro rata reinsurance | | 13,337 |
| | 8.8 | % | | 8,384 |
| | 6.0 | % | | 59.1% |
| | | | | | | | | | | |
| Excess of loss reinsurance: | | | | | | | | | | |
| Property | | 15,206 |
| | 10.0 | % | | 15,444 |
| | 11.1 | % | | (1.5)% |
| Liability | | 2,797 |
| | 1.8 | % | | 2,732 |
| | 2.0 | % | | 2.4% |
| Total excess of loss reinsurance | | 18,003 |
| | 11.8 | % | | 18,176 |
| | 13.1 | % | | (1.0)% |
| Total reinsurance | | $ | 31,340 |
| | 20.6 | % | | $ | 26,560 |
| | 19.1 | % | | 18.0% |
| | | | | | | | | | | |
| Consolidated | | $ | 152,151 |
| | 100.0 | % | | $ | 139,024 |
| | 100.0 | % | | 9.4% |
|
| | | | | | | | | | | | | | | | |
| NET WRITTEN PREMIUMS | | | | | | | | | | |
| | | Six Months Ended
June 30, 2015 | | Six Months Ended
June 30, 2014 | | |
| ($ in thousands) | | Written premiums | | Percent of net written premiums | | Written premiums | | Percent of net written premiums | | Change in net written premiums |
| Property and casualty insurance | | | | | | | | | | |
| Commercial lines: | | | | | | | | | | |
| Automobile | | $ | 58,043 |
| | 19.7 | % | | $ | 52,543 |
| | 19.1 | % | | 10.5% |
| Property | | 52,962 |
| | 17.9 | % | | 49,257 |
| | 18.0 | % | | 7.5% |
| Workers' compensation | | 43,527 |
| | 14.8 | % | | 41,467 |
| | 15.1 | % | | 5.0% |
| Liability | | 49,209 |
| | 16.7 | % | | 45,294 |
| | 16.5 | % | | 8.6% |
| Other | | 4,200 |
| | 1.4 | % | | 3,555 |
| | 1.3 | % | | 18.1% |
| Total commercial lines | | 207,941 |
| | 70.5 | % | | 192,116 |
| | 70.0 | % | | 8.2% |
| | | | | | | | | | | |
| Personal lines: | | | | | | | | | | |
| Automobile | | 11,611 |
| | 3.9 | % | | 12,621 |
| | 4.6 | % | | (8.0)% |
| Homeowners | | 10,055 |
| | 3.4 | % | | 10,240 |
| | 3.7 | % | | (1.8)% |
| Total personal lines | | 21,666 |
| | 7.3 | % | | 22,861 |
| | 8.3 | % | | (5.2)% |
| Total property and casualty insurance | | $ | 229,607 |
| | 77.8 | % | | $ | 214,977 |
| | 78.3 | % | | 6.8% |
| | | | | | | | | | | |
| Reinsurance | | | | | | | | | | |
| Pro rata reinsurance: | | | | | | | | | | |
| Multiline | | $ | 2,264 |
| | 0.8 | % | | $ | 3,982 |
| | 1.5 | % | | (43.1)% |
| Property | | 6,683 |
| | 2.2 | % | | 6,192 |
| | 2.3 | % | | 7.9% |
| Liability | | 13,346 |
| | 4.5 | % | | 6,447 |
| | 2.3 | % | | 107.0% |
| Marine | | 5,836 |
| | 2.0 | % | | 5,788 |
| | 2.1 | % | | 0.8% |
| Total pro rata reinsurance | | 28,129 |
| | 9.5 | % | | 22,409 |
| | 8.2 | % | | 25.5% |
| | | | | | | | | | | |
| Excess of loss reinsurance: | | | | | | | | | | |
| Property | | 30,742 |
| | 10.4 | % | | 31,413 |
| | 11.4 | % | | (2.1)% |
| Liability | | 6,597 |
| | 2.3 | % | | 5,630 |
| | 2.1 | % | | 17.2% |
| Total excess of loss reinsurance | | 37,339 |
| | 12.7 | % | | 37,043 |
| | 13.5 | % | | 0.8% |
| Total reinsurance | | $ | 65,468 |
| | 22.2 | % | | $ | 59,452 |
| | 21.7 | % | | 10.1% |
| | | | | | | | | | | |
| Consolidated | | $ | 295,075 |
| | 100.0 | % | | $ | 274,429 |
| | 100.0 | % | | 7.5% |
