EXHIBIT 99
EMC INSURANCE GROUP INC. REPORTS
2011 THIRD QUARTER RESULTS
Third Quarter Ended September 30, 2011
Operating Loss Per Share – $0.14
Net Loss Per Share – $0.32
Net Realized Investment Losses Per Share – $0.18
Catastrophe Losses Per Share – $1.33
Large Losses Per Share – $0.24
GAAP Combined Ratio – 114.5 percent
Nine-Month Period Ended September 30, 2011
Operating Loss Per Share – $1.21
Net Loss Per Share – $0.88
Net Realized Investment Gains Per Share – $ 0.32
Catastrophe Losses Per Share – $3.86
Large Losses Per Share – $0.65
GAAP Combined Ratio – 120.3 percent
2011 Operating Loss Guidance – ($0.55) to ($0.80) per share
DES MOINES, Iowa (November 8, 2011) - EMC Insurance Group Inc. (Nasdaq OMX/GS:EMCI) today reported an operating loss of $0.14 per share for the third quarter ended September 30, 2011, compared to operating income of $0.49 per share for the third quarter of 20101. Operating loss for the nine-month period ended September 30, 2011 was $1.21 per share, compared to operating income of $1.51 for the same period in 2010.
Net loss, including realized investment gains and losses, totaled $4,144,000 ($0.32 per share) for the third quarter of 2011 compared to net income of $7,459,000 ($0.57 per share) for the third quarter of 2010. Net loss for the nine-month period ended September 30, 2011 was $11,404,000 ($0.88 per share) compared to net income of $20,635,000 ($1.58 per share) for the same period in 2010.
Catastrophe losses totaled a record $26,366,000 ($1.33 per share after tax) in the third quarter and an unprecedented $76,836,000 ($3.86 per share after tax) in the first nine months of 2011. Catastrophe losses accounted for 24.5 percentage points of the combined ratio in the third quarter, and 25.2 percentage points in the first nine months of 2011. To put this into perspective, the Company’s most recent 10-year (2001 through 2010) average for catastrophe losses during the first nine months of a year is 11.3 percentage points of the combined ratio.
“While the record catastrophe losses of 2011 have been the focus of most of our discussions this year, we have continued to develop and implement strategies that are designed to improve future operations,” stated Bruce G. Kelley, President and Chief Executive Officer. “Our extensive branch structure provides management with current market information from around the country. This information is used to adjust our product offerings and rate levels, and has helped us achieve premium growth in 2011 through rate level increases in both personal and commercial lines of business, as well as increased policy counts,” continued Kelley.
Premiums earned increased 10.4 percent to $107,416,000 for the third quarter of 2011, from $97,284,000 for the third quarter of 2010. For the nine months ended September 30, 2011, premiums earned increased 6.5 percent to $304,635,000 from $286,060,000 in 2010.
Investment income decreased 7.4 percent to $11,331,000 in the third quarter of 2011 from $12,235,000 in the third quarter of 2010. For the nine months ended September 30, 2011, investment income decreased 6.8 percent to $34,883,000 from $37,414,000 in 2010. The large declines in investment income are attributed to a persistent decline in the average coupon rate on fixed maturity securities during the past several years and an increase in short-term investments, which carry far lower yields.
The Company experienced $8,612,000 ($0.43 per share after tax) of favorable development on prior years’ reserves during the third quarter of 2011, compared to $18,821,000 ($0.94 per share after tax) in the third quarter of 2010. For the nine months ended September 30, 2011, the Company experienced $21,709,000 ($1.09 per share after tax) of favorable development compared to $46,187,000 ($2.30 per share after tax) in 2010. As in prior periods, development on closed claims is the main driver of the favorable development.
Net realized investment losses totaled $2,289,000 ($0.18 per share) for the third quarter of 2011 compared to net realized investment gains of $1,137,000 ($0.09 per share) in 2010. For the nine-month period ended September 30, 2011, net realized investment gains totaled $4,184,000 ($0.32 per share), compared to $929,000 ($0.07 per share) in 2010. During the third quarter of 2011, the Company recognized $4,912,000 ($0.25 per share after tax) of “other-than-temporary” investment impairment losses on 27 equity securities because management determined that it would likely not hold those securities until they recovered to their cost basis. This compares to $366,000 ($0.02 per share after tax) of “other-than-temporary” investment impairment losses in the third quarter of 2010. During the first nine months of 2011, “other-than-temporary” investment impairment losses totaled $5,828,000 ($0.29 per share after tax), compared to $2,295,000 ($0.11 per share after tax) in 2010. The large amount of realized investment gains for the nine months ended September 30, 2011 resulted from first quarter activity in the equity portfolio, when market prices were at elevated levels.
Large losses (which the Company defines as losses greater than $500,000 for the EMC Insurance Companies’ pool, excluding catastrophe losses) decreased to $4,664,000 ($0.24 per share after tax) in the third quarter of 2011 from $6,608,000 ($0.33 per share after tax) in the third quarter of 2010. For the nine months ended September 30, 2011, large losses decreased to $12,844,000 from $13,579,000 in 2010.
The Company’s combined ratio using U.S. generally accepted accounting principles (GAAP) was 114.5 percent in the third quarter of 2011 compared to 103.3 percent in the third quarter of 2010. For the nine months ended September 30, 2011, the GAAP combined ratio was 120.3 percent compared to 103.3 percent in 2010.
At September 30, 2011, consolidated assets totaled $1.3 billion, including $1.1 billion in the investment portfolio, and stockholders’ equity totaled $356.4 million, a decrease of 3.3 percent from December 31, 2010. Net book value of the Company’s stock decreased to $27.69 per share from $28.52 per share at December 31, 2010. Book value excluding accumulated other comprehensive income decreased to $25.21 per share from $26.63 per share at December 31, 2010.
On October 21, 2011 management announced that, based on actual results for the first nine months of the year and projections for the remainder of the year, it was projecting a 2011 operating loss in the range of ($0.55) to ($0.80) per share. This guidance is based on a projected GAAP combined ratio of 115.2 percent for the year. Management has reaffirmed that guidance.
During the third quarter of 2011, the Company completed its $25 million stock repurchase program with the acquisition of 81,500 shares of its common stock at an average cost of $18.81 per share. Since the inception of the repurchase program in March, 2008, the Company has repurchased and retired 1,078,733 shares of common stock at an average cost of $23.17 per share. As previously disclosed, on November 3, 2011 the Company’s board of directors authorized a new $15 million stock repurchase program. This program became effective immediately and does not have an expiration date. The timing and terms of the purchases are determined by management based on market conditions and are conducted in accordance with the applicable rules of the Securities and Exchange Commission. Common stock repurchased under this new program will be retired by the Company.
The Company’s parent organization, Employers Mutual Casualty Company, currently has a stock purchase program in place, with about $4.5 million of its $15 million authorization remaining. This program has been dormant and will remain so while the Company’s new repurchase program is active.
The Company will hold an earnings teleconference call at 11:00 a.m. eastern standard time on November 8, 2011 to allow securities analysts, stockholders and other interested parties the opportunity to hear management discuss the Company’s results for the quarter ended September 30, 2011, as well as its expectations for the remainder of 2011. Dial-in information for the call is toll-free 1-877-407-9205 (International: 1-201-689-8054). The event will be archived and available for digital replay through February 18, 2012. 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 381061.
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 February 8, 2012. 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. 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. Additional information regarding EMC Insurance Companies may be found at www.emcins.com.
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; |
| | · | “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 (loss)” 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 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 (loss). 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 (loss) to net income (loss):
| | | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| | | | | | | | | | | | | |
| Operating income (loss) | | $ | (1,854,991 | ) | | $ | 6,321,120 | | | $ | (15,587,845 | ) | | $ | 19,706,096 | |
| Net realized investment gains (losses) | | | (2,289,092 | ) | | | 1,137,455 | | | | 4,183,893 | | | | 929,044 | |
| Net income (loss) | | $ | (4,144,083 | ) | | $ | 7,458,575 | | | $ | (11,403,952 | ) | | $ | 20,635,140 | |
CONSOLIDATED BALANCE SHEETS – UNAUDITED
| | | September 30, | | | December 31, | |
| | | 2011 | | | 2010 | |
| ASSETS | | | | | | |
| Investments: | | | | | | |
| Fixed maturities: | | | | | | |
| Securities held-to-maturity, at amortized cost (fair value $364,994 and $389,679) | | $ | 317,279 | | | $ | 340,803 | |
| Securities available-for-sale, at fair value (amortized cost $894,942,793 and $909,582,782) | | | 952,756,369 | | | | 941,537,026 | |
| Equity securities available-for-sale, at fair value (cost $89,248,731 and $75,721,039) | | | 99,327,795 | | | | 101,138,982 | |
| Other long-term investments, at cost | | | 18,352 | | | | 29,827 | |
| Short-term investments, at cost | | | 66,257,086 | | | | 36,616,111 | |
| Total investments | | | 1,118,676,881 | | | | 1,079,662,749 | |
| | | | | | | | | |
| Cash | | | 365,574 | | | | 491,994 | |
| Reinsurance receivables due from affiliate | | | 42,556,872 | | | | 30,256,586 | |
| Prepaid reinsurance premiums due from affiliate | | | 10,400,141 | | | | 9,530,426 | |
Deferred policy acquisition costs (affiliated $44,143,760 and $37,584,448) | | | 44,152,508 | | | | 37,584,448 | |
| Prepaid pension benefits due from affiliate | | | 4,001,151 | | | | 5,125,701 | |
| Accrued investment income | | | 10,802,976 | | | | 10,925,854 | |
| Accounts receivable | | | 1,352,056 | | | | 1,716,150 | |
| Income taxes recoverable | | | 10,618,339 | | | | 2,350,864 | |
| Deferred income taxes | | | 3,930,487 | | | | 6,690,218 | |
| Goodwill | | | 941,586 | | | | 941,586 | |
| Other assets (affiliated $4,353,943 and $2,433,445) | | | 4,530,550 | | | | 2,517,922 | |
| Total assets | | $ | 1,252,329,121 | | | $ | 1,187,794,498 | |
CONSOLIDATED BALANCE SHEETS – UNAUDITED
| | | September 30, | | | December 31, | |
| | | 2011 | | | 2010 | |
| LIABILITIES | | | | | | |
| Losses and settlement expenses (affiliated $596,866,878 and $553,125,183) | | $ | 601,324,726 | | | $ | 556,140,956 | |
| Unearned premiums (affiliated $196,010,325 and $167,896,119) | | | 196,053,488 | | | | 167,896,119 | |
| Other policyholders' funds due to affiliate | | | 5,859,924 | | | | 8,315,751 | |
| Surplus notes payable to affiliate | | | 25,000,000 | | | | 25,000,000 | |
| Amounts due affiliate to settle inter-company transaction balances | | | 23,350,909 | | | | 18,380,813 | |
| Pension and postretirement benefits payable to affiliate | | | 21,652,677 | | | | 20,418,716 | |
| Other liabilities (affiliated $14,993,243 and $22,861,092) | | | 22,658,051 | | | | 23,001,141 | |
| Total liabilities | | | 895,899,775 | | | | 819,153,496 | |
| | | | | | | | | |
| STOCKHOLDERS' EQUITY | | | | | | | | |
Common stock, $1 par value, authorized 20,000,000 shares; issued and outstanding, 12,870,541 shares in 2011 and 12,927,678 shares in 2010 | | | 12,870,541 | | | | 12,927,678 | |
| Additional paid-in capital | | | 88,177,145 | | | | 88,937,294 | |
| Accumulated other comprehensive income (loss): | | | | | | | | |
| Net unrealized losses on fixed maturity securities with "other-than-temporary" impairments | | | - | | | | (69,852 | ) |
| Other net unrealized gains | | | 44,130,217 | | | | 37,361,774 | |
| Unrecognized pension and postretirement benefits (all affiliated) | | | (12,257,939 | ) | | | (12,796,435 | ) |
| Total accumulated other comprehensive income | | | 31,872,278 | | | | 24,495,487 | |
| Retained earnings | | | 223,509,382 | | | | 242,280,543 | |
| Total stockholders' equity | | | 356,429,346 | | | | 368,641,002 | |
| Total liabilities and stockholders' equity | | $ | 1,252,329,121 | | | $ | 1,187,794,498 | |
CONSOLIDATED STATEMENTS OF INCOME – UNAUDITED
| Quarter Ended September 30, 2011 | | | | | Reinsurance | | | | | | Consolidated | |
Revenues: | | | | | | | | | | | | |
| Premiums earned | | $ | 82,295,757 | | | $ | 25,120,500 | | | $ | - | | | $ | 107,416,257 | |
| Investment income, net | | | 8,222,036 | | | | 3,109,923 | | | | (708 | ) | | | 11,331,251 | |
| Other income | | | 198,157 | | | | - | | | | - | | | | 198,157 | |
| | | | 90,715,950 | | | | 28,230,423 | | | | (708 | ) | | | 118,945,665 | |
Losses and expenses: | | | | | | | | | | | | | | | | |
| Losses and settlement expenses | | | 70,529,911 | | | | 20,830,766 | | | | - | | | | 91,360,677 | |
| Dividends to policyholders | | | 1,713,336 | | | | - | | | | - | | | | 1,713,336 | |
| Amortization of deferred policy acquisition costs | | | 18,339,210 | | | | 4,944,972 | | | | - | | | | 23,284,182 | |
| Other underwriting expenses | | | 6,801,615 | | | | (131,080 | ) | | | - | | | | 6,670,535 | |
| Interest expense | | | 225,000 | | | | - | | | | - | | | | 225,000 | |
| Other expenses | | | 209,359 | | | | (343,920 | ) | | | 310,611 | | | | 176,050 | |
| | | | 97,818,431 | | | | 25,300,738 | | | | 310,611 | | | | 123,429,780 | |
| Operating income (loss) before income taxes | | | (7,102,481 | ) | | | 2,929,685 | | | | (311,319 | ) | | | (4,484,115 | ) |
| Realized investment losses | | | (2,723,889 | ) | | | (797,792 | ) | | | - | | | | (3,521,681 | ) |
| Income (loss) before income taxes | | | (9,826,370 | ) | | | 2,131,893 | | | | (311,319 | ) | | | (8,005,796 | ) |
Income tax expense (benefit): | | | | | | | | | | | | | | | | |
| Current | | | (3,690,016 | ) | | | 690,454 | | | | (108,962 | ) | | | (3,108,524 | ) |
| Deferred | | | (527,989 | ) | | | (225,200 | ) | | | - | | | | (753,189 | ) |
| | | | (4,218,005 | ) | | | 465,254 | | | | (108,962 | ) | | | (3,861,713 | ) |
| Net income (loss) | | $ | (5,608,365 | ) | | $ | 1,666,639 | | | $ | (202,357 | ) | | $ | (4,144,083 | ) |
| Average shares outstanding | | | | | | | | | | | | | | | 12,886,163 | |
Per Share Data: | | | | | | | | | | | | | | | | |
| Net income (loss) per share - basic and diluted | | $ | (0.44 | ) | | $ | 0.14 | | | $ | (0.02 | ) | | $ | (0.32 | ) |
Decrease in provision for insured events of prior years (after tax) | | $ | 0.20 | | | $ | 0.23 | | | $ | - | | | $ | 0.43 | |
| Catastrophe and storm losses (after tax) | | $ | (0.98 | ) | | $ | (0.35 | ) | | $ | - | | | $ | (1.33 | ) |
| Dividends per share | | | | | | | | | | | | | | $ | 0.19 | |
Other Information of Interest: | | | | | | | | | | | | | | | | |
| Net written premiums | | $ | 102,299,680 | | | $ | 25,824,071 | | | $ | - | | | $ | 128,123,751 | |
Decrease in provision for insured events of prior years | | $ | (4,096,507 | ) | | $ | (4,515,320 | ) | | $ | - | | | $ | (8,611,827 | ) |
| Catastrophe and storm losses | | $ | 19,342,389 | | | $ | 7,023,909 | | | $ | - | | | $ | 26,366,298 | |
| GAAP Combined Ratio: | | | | | | | | | | | | | | | | |
| Loss ratio | | | 85.7 | % | | | 82.9 | % | | | - | | | | 85.1 | % |
| Expense ratio | | | 32.6 | % | | | 19.2 | % | | | - | | | | 29.4 | % |
| | | | 118.3 | % | | | 102.1 | % | | | - | | | | 114.5 | % |
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED – CONTINUED
| Quarter Ended September 30, 2010 | | | | | Reinsurance | | | | | | Consolidated | |
Revenues: | | | | | | | | | | | |
| Premiums earned | | $ | 76,974,312 | | | $ | 20,309,925 | | | $ | - | | | $ | 97,284,237 | |
| Investment income, net | | | 9,111,308 | | | | 3,123,829 | | | | (130 | ) | | | 12,235,007 | |
| Other income | | | 229,520 | | | | - | | | | - | | | | 229,520 | |
| | | | 86,315,140 | | | | 23,433,754 | | | | (130 | ) | | | 109,748,764 | |
Losses and expenses: | | | | | | | | | | | | | | | | |
| Losses and settlement expenses | | | 56,436,921 | | | | 11,135,598 | | | | - | | | | 67,572,519 | |
| Dividends to policyholders | | | 1,905,231 | | | | - | | | | - | | | | 1,905,231 | |
| Amortization of deferred policy acquisition costs | | | 17,405,551 | | | | 4,185,030 | | | | - | | | | 21,590,581 | |
| Other underwriting expenses | | | 8,038,531 | | | | 1,384,425 | | | | - | | | | 9,422,956 | |
| Interest expense | | | 225,000 | | | | - | | | | - | | | | 225,000 | |
| Other expenses | | | 206,750 | | | | 416,176 | | | | 343,030 | | | | 965,956 | |
| | | | 84,217,984 | | | | 17,121,229 | | | | 343,030 | | | | 101,682,243 | |
| Operating income (loss) before income taxes | | | 2,097,156 | | | | 6,312,525 | | | | (343,160 | ) | | | 8,066,521 | |
| Realized investment gains | | | 1,340,740 | | | | 409,190 | | | | - | | | | 1,749,930 | |
| Income (loss) before income taxes | | | 3,437,896 | | | | 6,721,715 | | | | (343,160 | ) | | | 9,816,451 | |
Income tax expense (benefit): | | | | | | | | | | | | | | | | |
| Current | | | 1,031 | | | | 2,174,359 | | | | (120,105 | ) | | | 2,055,285 | |
| Deferred | | | 437,452 | | | | (134,861 | ) | | | - | | | | 302,591 | |
| | | | 438,483 | | | | 2,039,498 | | | | (120,105 | ) | | | 2,357,876 | |
| Net income (loss) | | $ | 2,999,413 | | | $ | 4,682,217 | | | $ | (223,055 | ) | | $ | 7,458,575 | |
| Average shares outstanding | | | | | | | | | | | | | | | 12,979,372 | |
Per Share Data: | | | | | | | | | | | | | | | | |
| Net income (loss) per share - basic and diluted | | $ | 0.23 | | | $ | 0.36 | | | $ | (0.02 | ) | | $ | 0.57 | |
Decrease in provision for insured events of prior years (after tax) | | $ | 0.57 | | | $ | 0.37 | | | $ | - | | | $ | 0.94 | |
| Catastrophe and storm losses (after tax) | | $ | (0.78 | ) | | $ | (0.18 | ) | | $ | - | | | $ | (0.96 | ) |
| Dividends per share | | | | | | | | | | | | | | $ | 0.18 | |
Other Information of Interest: | | | | | | | | | | | | | | | | |
| Net written premiums | | $ | 93,017,486 | | | $ | 21,340,396 | | | $ | - | | | $ | 114,357,882 | |
Decrease in provision for insured events of prior years | | $ | (11,441,187 | ) | | $ | (7,379,457 | ) | | $ | - | | | $ | (18,820,644 | ) |
| Catastrophe and storm losses | | $ | 15,528,494 | | | $ | 3,558,586 | | | $ | - | | | $ | 19,087,080 | |
| GAAP Combined Ratio: | | | | | | | | | | | | | | | | |
| Loss ratio | | | 73.3 | % | | | 54.8 | % | | | - | | | | 69.5 | % |
| Expense ratio | | | 35.5 | % | | | 27.5 | % | | | - | | | | 33.8 | % |
| | | | 108.8 | % | | | 82.3 | % | | | - | | | | 103.3 | % |
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED – CONTINUED
| Nine Months Ended September 30, 2011 | | | | | Reinsurance | | | | | | Consolidated | |
Revenues: | | | | | | | | | | | |
| Premiums earned | | $ | 237,988,257 | | | $ | 66,646,343 | | | $ | - | | | $ | 304,634,600 | |
| Investment income, net | | | 25,505,564 | | | | 9,377,492 | | | | (102 | ) | | | 34,882,954 | |
| Other income | | | 638,470 | | | | - | | | | - | | | | 638,470 | |
| | | | 264,132,291 | | | | 76,023,835 | | | | (102 | ) | | | 340,156,024 | |
Losses and expenses: | | | | | | | | | | | | | | | | |
| Losses and settlement expenses | | | 194,317,119 | | | | 72,183,925 | | | | - | | | | 266,501,044 | |
| Dividends to policyholders | | | 4,081,374 | | | | - | | | | - | | | | 4,081,374 | |
| Amortization of deferred policy acquisition costs | | | 57,202,138 | | | | 13,737,988 | | | | - | | | | 70,940,126 | |
| Other underwriting expenses | | | 24,625,002 | | | | 301,969 | | | | - | | | | 24,926,971 | |
| Interest expense | | | 675,000 | | | | - | | | | - | | | | 675,000 | |
| Other expenses | | | 535,800 | | | | 597,928 | | | | 997,747 | | | | 2,131,475 | |
| | | | 281,436,433 | | | | 86,821,810 | | | | 997,747 | | | | 369,255,990 | |
| Operating loss before income taxes | | | (17,304,142 | ) | | | (10,797,975 | ) | | | (997,849 | ) | | | (29,099,966 | ) |
| Realized investment gains | | | 4,933,135 | | | | 1,503,623 | | | | - | | | | 6,436,758 | |
| Loss before income taxes | | | (12,371,007 | ) | | | (9,294,352 | ) | | | (997,849 | ) | | | (22,663,208 | ) |
Income tax benefit: | | | | | | | | | | | | | | | | |
| Current | | | (6,562,434 | ) | | | (3,135,188 | ) | | | (349,247 | ) | | | (10,046,869 | ) |
| Deferred | | | (157,060 | ) | | | (1,055,327 | ) | | | - | | | | (1,212,387 | ) |
| | | | (6,719,494 | ) | | | (4,190,515 | ) | | | (349,247 | ) | | | (11,259,256 | ) |
| Net loss | | $ | (5,651,513 | ) | | $ | (5,103,837 | ) | | $ | (648,602 | ) | | $ | (11,403,952 | ) |
| Average shares outstanding | | | | | | | | | | | | | | | 12,926,670 | |
Per Share Data: | | | | | | | | | | | | | | | | |
| Net loss per share - basic and diluted | | $ | (0.44 | ) | | $ | (0.39 | ) | | $ | (0.05 | ) | | $ | (0.88 | ) |
Decrease in provision for insured events of prior years (after tax) | | $ | 0.88 | | | $ | 0.21 | | | $ | - | | | $ | 1.09 | |
| Catastrophe and storm losses (after tax) | | $ | (2.63 | ) | | $ | (1.23 | ) | | $ | - | | | $ | (3.86 | ) |
| Dividends per share | | | | | | | | | | | | | | $ | 0.57 | |
| Book value per share | | | | | | | | | | | | | | $ | 27.69 | |
| Effective tax rate | | | | | | | | | | | | | | | 49.7 | % |
| Annualized net loss as a percent of beg. SH equity | | | | | | | | | | | | | | | (4.1 | )% |
Other Information of Interest: | | | | | | | | | | | | | | | | |
| Net written premiums | | $ | 263,833,906 | | | $ | 68,280,632 | | | $ | - | | | $ | 332,114,538 | |
Decrease in provision for insured events of prior years | | $ | (17,503,593 | ) | | $ | (4,205,252 | ) | | $ | - | | | $ | (21,708,845 | ) |
| Catastrophe and storm losses | | $ | 52,300,068 | | | $ | 24,535,503 | | | $ | - | | | $ | 76,835,571 | |
| GAAP Combined Ratio: | | | | | | | | | | | | | | | | |
| Loss ratio | | | 81.6 | % | | | 108.3 | % | | | - | | | | 87.5 | % |
| Expense ratio | | | 36.1 | % | | | 21.1 | % | | | - | | | | 32.8 | % |
| | | | 117.7 | % | | | 129.4 | % | | | - | | | | 120.3 | % |
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED – CONTINUED
| Nine Months Ended September 30, 2010 | | | | | Reinsurance | | | | | | Consolidated | |
Revenues: | | | | | | | | | | | |
| Premiums earned | | $ | 227,598,574 | | | $ | 58,461,840 | | | $ | - | | | $ | 286,060,414 | |
| Investment income, net | | | 27,997,409 | | | | 9,422,006 | | | | (5,397 | ) | | | 37,414,018 | |
| Other income | | | 656,567 | | | | - | | | | - | | | | 656,567 | |
| | | | 256,252,550 | | | | 67,883,846 | | | | (5,397 | ) | | | 324,130,999 | |
Losses and expenses: | | | | | | | | | | | | | | | | |
| Losses and settlement expenses | | | 157,248,235 | | | | 37,518,976 | | | | - | | | | 194,767,211 | |
| Dividends to policyholders | | | 5,778,317 | | | | - | | | | - | | | | 5,778,317 | |
| Amortization of deferred policy acquisition costs | | | 53,680,134 | | | | 12,416,847 | | | | - | | | | 66,096,981 | |
| Other underwriting expenses | | | 26,188,986 | | | | 2,733,799 | | | | - | | | | 28,922,785 | |
| Interest expense | | | 675,000 | | | | - | | | | - | | | | 675,000 | |
| Other expenses | | | 633,558 | | | | (237,116 | ) | | | 1,068,424 | | | | 1,464,866 | |
| | | | 244,204,230 | | | | 52,432,506 | | | | 1,068,424 | | | | 297,705,160 | |
| Operating income (loss) before income taxes | | | 12,048,320 | | | | 15,451,340 | | | | (1,073,821 | ) | | | 26,425,839 | |
| Realized investment gains | | | 1,134,882 | | | | 294,416 | | | | - | | | | 1,429,298 | |
| Income (loss) before income taxes | | | 13,183,202 | | | | 15,745,756 | | | | (1,073,821 | ) | | | 27,855,137 | |
Income tax expense (benefit): | | | | | | | | | | | | | | | | |
| Current | | | 2,124,545 | | | | 4,842,980 | | | | (375,837 | ) | | | 6,591,688 | |
| Deferred | | | 934,985 | | | | (306,676 | ) | | | - | | | | 628,309 | |
| | | | 3,059,530 | | | | 4,536,304 | | | | (375,837 | ) | | | 7,219,997 | |
| Net income (loss) | | $ | 10,123,672 | | | $ | 11,209,452 | | | $ | (697,984 | ) | | $ | 20,635,140 | |
| Average shares outstanding | | | | | | | | | | | | | | | 13,077,450 | |
Per Share Data: | | | | | | | | | | | | | | | | |
| Net income (loss) per share - basic and diluted | | $ | 0.77 | | | $ | 0.86 | | | $ | (0.05 | ) | | $ | 1.58 | |
Decrease in provision for insured events of prior years (after tax) | | $ | 1.55 | | | $ | 0.75 | | | $ | - | | | $ | 2.30 | |
| Catastrophe and storm losses (after tax) | | $ | (1.58 | ) | | $ | (0.36 | ) | | $ | - | | | $ | (1.94 | ) |
| Dividends per share | | | | | | | | | | | | | | $ | 0.54 | |
| Book value per share | | | | | | | | | | | | | | $ | 29.28 | |
| Effective tax rate | | | | | | | | | | | | | | | 25.9 | % |
| Annualized net income as a percent of beg. SH equity | | | | | | | | | | | | | | | 8.0 | % |
Other Information of Interest: | | | | | | | | | | | | | | | | |
| Net written premiums | | $ | 247,592,789 | | | $ | 59,140,644 | | | $ | - | | | $ | 306,733,433 | |
Decrease in provision for insured events of prior years | | $ | (31,182,899 | ) | | $ | (15,003,956 | ) | | $ | - | | | $ | (46,186,855 | ) |
| Catastrophe and storm losses | | $ | 31,753,790 | | | $ | 7,338,748 | | | $ | - | | | $ | 39,092,538 | |
| GAAP Combined Ratio: | | | | | | | | | | | | | | | | |
| Loss ratio | | | 69.1 | % | | | 64.2 | % | | | - | | | | 68.1 | % |
| Expense ratio | | | 37.6 | % | | | 25.9 | % | | | - | | | | 35.2 | % |
| | | | 106.7 | % | | | 90.1 | % | | | - | | | | 103.3 | % |
INVESTMENTS
The Company had total cash and invested assets with a carrying value of $1.1 billion as of September 30, 2011 and December 31, 2010. The following table summarizes the Company’s cash and invested assets as of the dates indicated:
| | | September 30, 2011 | |
| ($ in thousands) | | | | | | | | | | | | |
| Fixed maturity securities held-to-maturity | | $ | 317 | | | $ | 365 | | | | - | | | $ | 317 | |
| Fixed maturity securities available-for-sale | | | 894,943 | | | | 952,756 | | | | 85.2 | % | | | 952,756 | |
| Equity securities available-for-sale | | | 89,249 | | | | 99,328 | | | | 8.9 | % | | | 99,328 | |
| Cash | | | 366 | | | | 366 | | | | - | | | | 366 | |
| Short-term investments | | | 66,257 | | | | 66,257 | | | | 5.9 | % | | | 66,257 | |
| Other long-term investments | | | 18 | | | | 18 | | | | - | | | | 18 | |
| | | $ | 1,051,150 | | | $ | 1,119,090 | | | | 100.0 | % | | $ | 1,119,042 | |
| | | December 31, 2010 | |
| ($ in thousands) | | | | | | | | | | | | |
| Fixed maturity securities held-to-maturity | | $ | 341 | | | $ | 390 | | | | - | | | $ | 341 | |
| Fixed maturity securities available-for-sale | | | 909,583 | | | | 941,537 | | | | 87.2 | % | | | 941,537 | |
| Equity securities available-for-sale | | | 75,721 | | | | 101,139 | | | | 9.4 | % | | | 101,139 | |
| Cash | | | 492 | | | | 492 | | | | - | | | | 492 | |
| Short-term investments | | | 36,616 | | | | 36,616 | | | | 3.4 | % | | | 36,616 | |
| Other long-term investments | | | 30 | | | | 30 | | | | - | | | | 30 | |
| | | $ | 1,022,783 | | | $ | 1,080,204 | | | | 100.0 | % | | $ | 1,080,155 | |
NET WRITTEN PREMIUMS
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, 2011 | | | September 30, 2011 | |
| | | | | | | | | | | | | |
| Property and Casualty Insurance | | | | | | | | | | | | |
| Commercial Lines: | | | | | | | | | | | | |
| Automobile | | | 15.3 | % | | | 8.7 | % | | | 16.5 | % | | | 4.5 | % |
| Liability | | | 13.9 | % | | | 9.2 | % | | | 14.9 | % | | | 6.7 | % |
| Property | | | 17.6 | % | | | 9.8 | % | | | 17.3 | % | | | 7.2 | % |
| Workers' Compensation | | | 21.0 | % | | | 15.0 | % | | | 17.5 | % | | | 9.5 | % |
| Other | | | 1.7 | % | | | 0.7 | % | | | 1.8 | % | | | (6.2 | ) % |
| Total Commercial Lines | | | 69.5 | % | | | 10.7 | % | | | 68.0 | % | | | 6.6 | % |
| | | | | | | | | | | | | | | | | |
| Personal Lines: | | | | | | | | | | | | | | | | |
| Automobile | | | 5.4 | % | | | 0.1 | % | | | 6.5 | % | | | (3.0 | ) % |
| Property | | | 4.8 | % | | | 11.9 | % | | | 5.1 | % | | | 21.5 | % |
| Liability | | | 0.1 | % | | | 9.2 | % | | | 0.1 | % | | | 5.6 | % |
| Total Personal Lines | | | 10.3 | % | | | 5.4 | % | | | 11.7 | % | | | 6.4 | % |
| Total Property and Casualty Insurance | | | 79.8 | % | | | 10.0 | % | | | 79.7 | % | | | 6.6 | % |
| | | | | | | | | | | | | | | | | |
| Reinsurance (1) | | | 20.2 | % | | | 21.0 | % | | | 20.3 | % | | | 13.9 | % |
| Total | | | 100.0 | % | | | 12.0 | % | | | 100.0 | % | | | 8.0 | % |
(1) Excludes $920,597 positive portfolio adjustment related to the January 1, 2011 increased participation in the MRB pool.
