EMC Insurance (EMCI) 8-K Emc Insurance Group Inc. Reports

EXHIBIT 99

EMC INSURANCE GROUP INC. REPORTS

2010 FIRST QUARTER RESULTS

First Quarter 2010

Operating Income Per Share – $0.73

Net Income Per Share – $0.75

Catastrophe and Storm Losses Per Share – $0.17

Large Losses Per Share – $0.23

GAAP Combined Ratio – 98.1 percent

DES MOINES, Iowa (May 3, 2010) - EMC Insurance Group Inc. (NASDAQ OMX/NGS:EMCI) today reported operating income of $0.73 per share for the first quarter ended March 31, 2010 compared to operating income of $0.86 per share for the first quarter of 20091.  Net income, including realized investment gains and losses, totaled $9,878,000 ($0.75 per share) for the first quarter of 2010 compared to $5,804,000 ($0.44 per share) for the first quarter of 2009.

“We continue to manage through the soft market conditions,” stated Bruce G. Kelley, President and Chief Executive Officer. “Premium income in the first quarter was relatively flat.  Increases in personal lines and reinsurance premium income were sufficient to offset most of the decline experienced in the commercial lines of business.  Competition for good commercial lines business remains very strong and is expected to continue at this level through at least the first half of 2010.  We continue to implement rate increases where they are warranted, but do not expect to see overall rate levels improve much until the economy recovers,” continued Kelley.

Kelley went on to say that, “storm losses were significantly lower than the first quarter of 2009.  This reduction in storm losses, coupled with favorable reserve development and a significant increase in the market value of our investment portfolio, contributed to a 4.6 percent increase in the book value of our stock during the first quarter of 2010.”

Premiums earned declined slightly (0.1 percent decline) to $92,345,000 for the first quarter of 2010 as compared to $92,455,000 for the same period of 2009.

Investment income increased 2.0 percent to $12,517,000 for the first quarter of 2010 from $12,277,000 for the same period of 2009.  This increase is primarily attributed to an increase in the average invested balance of fixed maturity securities, which reflects the reinvestment of short-term holdings into Build America Bonds and other long-term securities.

The Company experienced $21,420,000 ($1.06 per share after tax) of favorable development on prior years’ reserves during the first quarter of 2010 compared to $21,058,000 ($1.03 per share after tax) in the first quarter of 2009.  Included in the first quarter 2010 amount is $650,000 ($0.03 per share after tax) of adverse development experienced on prior years’ catastrophe and storm loss reserves compared to $1,376,000 ($0.07 per share after tax) of favorable development experienced on prior years’ catastrophe and storm loss reserves in the first quarter of 2009.   The reinsurance segment experienced an unusually large amount of favorable development in the first quarter of 2010, totaling $7,808,000 ($0.39 per share after tax) compared to $4,219,000 ($0.21 per share after tax) in the first quarte r of 2009.  This favorable development primarily resulted from a reduction in the bulk IBNR reserve for accident years 2007 – 2009 in the property pro rata, catastrophe and casualty excess lines of business.

“Other-than-temporary” investment impairment losses declined significantly to $352,000 ($0.02 per share after tax) in the first quarter of 2010 from $8,357,000 ($0.41 per share after tax) reported in the first quarter of 2009.  The “other-than-temporary” impaired securities included three equity securities and two bonds.

Catastrophe and storm losses totaled $3,421,000 ($0.17 per share after tax) in the first quarter of 2010 compared to $5,088,000 ($0.25 per share after tax) in the first quarter of 2009.  Catastrophe and storm losses accounted for 3.7 percentage points of the combined ratio for the period ended March 31, 2010, which is slightly higher than historical average for the first quarter.

Large losses, which the Company defines as losses greater than $250,000, excluding catastrophe and storm losses, declined to $4,620,000 ($0.23 per share after tax) in the first quarter of 2010 from $5,655,000 ($0.28 per share after tax) in the first quarter of 2009.

As previously reported, the Company’s deferred income tax asset decreased approximately $800,000 ($0.06 per share) in the first quarter of 2010 as a result of the passage of the Patient Protection and Affordable Care Act (H.R. 3590) because the Company is no longer able to claim a tax deduction for drug expenses that are reimbursed under the Medicare Part D retiree drug subsidy (RDS) program.

The Company’s GAAP combined ratio was 98.1 percent in the first quarter of 2010 compared to 96.0 percent in the first quarter of 2009.

At March 31, 2010, consolidated assets totaled $1.2 billion, including $1.1 billion in the investment portfolio; stockholders’ equity increased 4.8 percent to $358.8 million; and the net book value of the Company’s stock was $27.32 per share, an increase of 4.6 percent from $26.11 per share at December 31, 2009.

Management of the Mutual Reinsurance Bureau (MRB) recently announced that Country Mutual will terminate its participation in the MRB pool at the end of this year; however, management of the pool anticipates that a new participant will be appointed to replace Country Mutual. . EMC Insurance Group’s parent, Employers Mutual Casualty Company, is currently a one-fifth participant in the pool.

As announced on February 3, 2010, management is projecting that 2010 operating income will be within a range of $1.90 to $2.15 per share. This guidance is based on a projected GAAP combined ratio of 103.7 percent for the year.

As of March 31, 2010, 736,133 shares of the Company’s common stock have been purchased under the Company’s $25 million stock repurchase program at a cost of approximately $17.9 million.  The timing and terms of the purchases are determined by management based on market conditions, and the transactions are conducted in accordance with the applicable rules of the SEC.  Common stock purchased under this program is being retired by the Company.  The Company’s parent organization, Employers Mutual Casualty Company, has a stock purchase program in place as well, with about $4.5 million of its $15 million authorization remaining.  This program is currently dormant and will not be reactivated until the Company’s repurchase program is completed.

The Company will hold an earnings teleconference call at 11:00 a.m. eastern daylight saving time on May 3, 2010 to allow securities analysts, stockholders and other interested parties the opportunity to hear management discuss the Company’s results for the quarter ended March 31, 2010, as well as its expectations for the remainder of the year. Dial-in information for the call is toll-free 1-877-407-8031 (International: 1-201-689-8031). The event will be archived and available for digital replay through May 17, 2010. The replay access information is toll-free 1-877-660-6853 (International: 1-201-612-7415); passcodes required for playback: account number 286, conference ID number 349073.

Members of the news media, investors and the general public are invited to access a live webcast of the conference call via http://www.investorcalendar.com or the Company’s investor relations page at www.emcins.com/ir.  The webcast will be archived and available for replay until August 3, 2010. A transcript of the teleconference will also be available on the Company’s website shortly after the completion of the teleconference.

EMC Insurance Group Inc. is a publicly held insurance holding company with operations in property and casualty insurance and reinsurance. EMCI was formed in 1974 and became publicly held in 1982. The Company’s common stock trades on the NASDAQ OMX Global Select Market tier of the NASDAQ OMX Stock Market under the symbol EMCI. 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.

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.

¹The 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 the following reconciliation of this non-GAAP financial measure to the U.S. 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.

Reconciliation of operating income to net income:

	Three Months Ended March 31,
	2010		2009
Operating income	$	9,536,899	$	11,388,864
Net realized investment gains (losses)		341,193		(5,585,001	)
Net income	$	9,878,092	$	5,803,863

CONSOLIDATED BALANCE SHEETS - UNAUDITED

	March 31,		December 31,
	2010		2009
ASSETS
Investments:
Fixed maturities:
Securities held-to-maturity, at amortized cost (fair value $457,654 and $460,877) .	$	404,578	$	410,005
Securities available-for-sale, at fair value (amortized cost $874,763,572 and $858,129,177)		909,636,075		884,688,114
Fixed maturity securities on loan:
Securities available-for-sale, at fair value (amortized cost $5,653,350 and $14,065,597)		5,661,499		14,492,872
Equity securities available-for-sale, at fair value (cost $74,007,221 and $73,114,920)		95,974,749		90,189,979
Other long-term investments, at cost		43,028		47,083
Short-term investments, at cost		42,591,167		55,390,096
Total investments		1,054,311,096		1,045,218,149
Balances resulting from related party transactions with
Employers Mutual:
Reinsurance receivables		29,948,024		30,544,558
Prepaid reinsurance premiums		6,816,201		5,112,386
Deferred policy acquisition costs		36,118,550		36,650,628
Other assets .		3,516,510		2,058,189
Cash		534,292		278,534
Accrued investment income .		12,734,422		11,082,132
Deferred policy acquisition costs		3,608		-
Accounts receivable		2,126,550		1,611,740
Deferred income taxes		9,958,199		15,044,357
Goodwill		941,586		941,586
Securities lending collateral		5,911,111		14,941,880
Other assets		24,000		2,303,654
Total assets	$	1,162,944,149	$	1,165,787,793

	March 31,			December 31,
	2010			2009
LIABILITIES
Balances resulting from related party transactions with Employers Mutual:
Losses and settlement expenses	$	551,539,590		$	553,787,770
Unearned premiums		159,017,958			159,486,096
Other policyholders' funds		8,543,714			7,918,665
Surplus notes payable		25,000,000			25,000,000
Indebtedness to related party		17,392,596			13,488,724
Employee retirement plans		19,316,435			18,176,720
Other liabilities		11,273,858			20,335,197
Losses and settlement expenses		2,878,053			2,363,807
Unearned premiums		16,989			-
Income taxes payable		3,142,060			5,488,760
Securities lending obligation		5,911,111			14,941,880
Other liabilities		82,468			2,382,489
Total liabilities		804,114,832			823,370,108
STOCKHOLDERS' EQUITY
Common stock, $1 par value, authorized 20,000,000 shares; issued and outstanding, 13,133,361 shares in 2010 and 13,114,481 shares in 2009		13,133,361			13,114,481
Additional paid-in capital		93,187,181			92,804,282
Accumulated other comprehensive income (loss):
Net unrealized losses on fixed maturity securities with "other-than-temporary" impairments		(16,492	)		(104,847	)
Other net unrealized gains		36,967,808			28,744,673
Employee retirement plans		(12,403,208	)		(12,587,484	)
Total accumulated other comprehensive income (loss)		24,548,108			16,052,342
Retained earnings		227,960,667			220,446,580
Total stockholders' equity		358,829,317			342,417,685
Total liabilities and stockholders' equity	$	1,162,944,149		$	1,165,787,793

CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

	Property and
	Casualty						Parent
Quarter Ended March 31, 2010	Insurance			Reinsurance			Company			Consolidated
Revenues:
Premiums earned	$	74,787,363		$	17,557,703		$	-		$	92,345,066
Investment income, net		9,416,496			3,104,100			(3,609	)		12,516,987
Other income		206,686			-			-			206,686
		84,410,545			20,661,803			(3,609	)		105,068,739
Losses and expenses:
Losses and settlement expenses		44,014,288			12,028,336			-			56,042,624
Dividends to policyholders		2,354,462			-			-			2,354,462
Amortization of deferred policy acquisition costs		18,251,004			3,614,111			-			21,865,115
Other underwriting expenses		9,051,013			1,314,181			-			10,365,194
Interest expense		225,000			-			-			225,000
Other expenses		227,724			(310,195	)		280,674			198,203
		74,123,491			16,646,433			280,674			91,050,598
Operating income (loss) before income taxes		10,287,054			4,015,370			(284,283	)		14,018,141
Realized investment gains		405,511			119,402			-			524,913
Income (loss) before income taxes		10,692,565			4,134,772			(284,283	)		14,543,054
Income tax expense (benefit):
Current		3,069,962			1,182,987			(99,499	)		4,153,450
Deferred		587,145			(75,633	)		-			511,512
		3,657,107			1,107,354			(99,499	)		4,664,962
Net income (loss)	$	7,035,458		$	3,027,418		$	(184,784	)	$	9,878,092
Average shares outstanding											13,123,810
Per Share Data:
Net income (loss) per share - basic and diluted	$	0.54		$	0.23		$	(0.02	)	$	0.75
Decrease in provision for insured events of prior years (after tax)	$	0.67		$	0.39		$	-		$	1.06
Catastrophe and storm losses (after tax)	$	(0.12	)	$	(0.05	)	$	-		$	(0.17	)
Dividends per share										$	0.18
Book value per share										$	27.32
Effective tax rate											32.1	%
Annualized net income as a percent of beg. SH equity											11.5	%
Other Information of Interest:
Net written premiums	$	72,555,642		$	17,996,129		$	-		$	90,551,771
Decrease in provision for insured events of prior years	$	(13,611,773	)	$	(7,808,189	)	$	-		$	(21,419,962	)
Catastrophe and storm losses	$	2,363,529		$	1,057,087		$	-		$	3,420,616
GAAP Combined Ratio:
Loss ratio		58.9	%		68.5	%		-			60.7	%
Expense ratio		39.6	%		28.1	%		-			37.4	%
		98.5	%		96.6	%		-			98.1	%

	Property and
	Casualty						Parent
Quarter Ended March 31, 2009	Insurance			Reinsurance			Company			Consolidated
Revenues:
Premiums earned	$	76,081,602		$	16,372,946		$	-		$	92,454,548
Investment income, net		9,219,519			3,045,049			12,667			12,277,235
Other income		152,986			-			-			152,986
		85,454,107			19,417,995			12,667			104,884,769
Losses and expenses:
Losses and settlement expenses		40,845,167			12,931,447			-			53,776,614
Dividends to policyholders		3,829,606			-			-			3,829,606
Amortization of deferred policy acquisition costs		18,878,083			3,132,623			-			22,010,706
Other underwriting expenses		8,772,174			358,109			-			9,130,283
Interest expense		225,000			-			-			225,000
Other expenses		231,134			(151,129	)		313,227			393,232
		72,781,164			16,271,050			313,227			89,365,441
Operating income (loss) before income taxes		12,672,943			3,146,945			(300,560	)		15,519,328
Realized investment losses		(5,790,171	)		(2,802,139	)		-			(8,592,310	)
Income (loss) before income taxes		6,882,772			344,806			(300,560	)		6,927,018
Income tax expense (benefit):
Current		4,062,677			623,501			(105,196	)		4,580,982
Deferred		(2,573,264	)		(884,563	)		-			(3,457,827	)
		1,489,413			(261,062	)		(105,196	)		1,123,155
Net income (loss)	$	5,393,359		$	605,868		$	(195,364	)	$	5,803,863
Average shares outstanding											13,249,735
Per Share Data:
Net income (loss) per share - basic and diluted	$	0.41		$	0.04		$	(0.01	)	$	0.44
Decrease in provision for insured events of prior years (after tax)	$	0.82		$	0.21		$	-		$	1.03
Catastrophe and storm losses (after tax)	$	(0.18	)	$	(0.07	)	$	-		$	(0.25	)
Dividends per share										$	0.18
Book value per share										$	21.62
Effective tax rate											16.2	%
Annualized net income as a percent of beg. SH equity											8.2	%
Other Information of Interest:
Net written premiums	$	72,029,230		$	16,929,500		$	-		$	88,958,730
Decrease in provision for insured events of prior years	$	(16,839,280	)	$	(4,218,874	)	$	-		$	(21,058,154	)
Catastrophe and storm losses	$	3,619,832		$	1,467,699		$	-		$	5,087,531
GAAP Combined Ratio:
Loss ratio		53.7	%		79.0	%		-			58.2	%
Expense ratio		41.4	%		21.3	%		-			37.8	%
		95.1	%		100.3	%		-			96.0	%

The Company had total cash and invested assets with a carrying value of $1.1 billion and $1.0 billion as of March 31, 2010 and December 31, 2009, respectively.  The following table summarizes the Company’s cash and invested assets as of the dates indicated:

	March 31, 2010
($ in thousands)	Amortized Cost		Fair Value		Percent of Total Fair Value			Carrying Value
Fixed maturity securities held-to-maturity	$	405	$	458		-		$	405
Fixed maturity securities available-for-sale		880,417		915,297		86.8	%		915,297
Equity securities available-for-sale		74,007		95,975		9.1	%		95,975
Cash		534		534		0.1	%		534
Short-term investments		42,591		42,591		4.0	%		42,591
Other long-term investments		43		43		-			43
	$	997,997	$	1,054,898		100.0	%	$	1,054,845

	December 31, 2009
($ in thousands)	Amortized Cost		Fair Value		Percent of Total Fair Value			Carrying Value
Fixed maturity securities held-to-maturity	$	410	$	461		0.1	%	$	410
Fixed maturity securities available-for-sale		872,195		899,181		86.0	%		899,181
Equity securities available-for-sale		73,115		90,190		8.6	%		90,190
Cash		279		279		-			279
Short-term investments		55,390		55,390		5.3	%		55,390
Other long-term investments		47		47		-			47
	$	1,001,436	$	1,045,548		100.0	%	$	1,045,497

NET WRITTEN PREMIUMS

	Three Months Ended
	March 31, 2010
	Percent of Net Written Premiums			Percent of Increase/ (Decrease) in Net Written Premiums
Property and Casualty Insurance
Commercial Lines:
Automobile		17.3	%		0.1	%
Liability		15.7	%		(8.9	) %
Property		16.8	%		5.8	%
Workers' Compensation		15.1	%		(7.2	) %
Other		2.2	%		9.9	%
Total Commercial Lines		67.1	%		(2.3	) %
Personal Lines:
Automobile		8.6	%		33.0	%
Property		4.3	%		0.6	%
Liability		0.1	%		(7.8	) %
Total Personal Lines		13.0	%		19.8	%
Total Property and Casualty Insurance		80.1	%		0.7	%
Reinsurance		19.9	%		6.3	%
Total		100.0	%		1.8	%