UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 11, 2005
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EMC INSURANCE GROUP INC.
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(Exact name of registrant as specified in its charter)
Iowa 0-10956 42-623455
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation) File Number) Identification No.)
717 Mulberry Street, Des Moines, Iowa 50309
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(Address of principal executive office) (Zip Code)
(515) 280-2902
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(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 7.01 Regulation FD Disclosure
On February 11, 2005, EMC Insurance Group Inc. issued the following
press release:
EMC INSURANCE GROUP INC. COMMENTS ON
FOURTH QUARTER 2004 ADVERSE DEVELOPMENT
AND CLARIFIES PREVIOUSLY RELEASED INFORMATION
DES MOINES, Iowa (February 11, 2005) - On January 24, 2005, EMC Insurance
Group Inc. (Nasdaq/NM:EMCI) (the "Company") commented on financial ratio
information released by its parent company, Employers Mutual Casualty
Company, and reported that the Company's statutory combined trade ratio for
the year ended December 31, 2004 was 104.2 percent. Today, the Company
expanded on that disclosure and announced that adverse development on prior
years' reserves totaled approximately $15,400,000 for the fourth quarter of
2004. This adverse development will reduce fourth quarter earnings by
approximately $10,010,000 ($0.76 per share) on an after tax basis and
represents approximately 3.8 percent of the total loss and settlement expense
reserves carried at September 30, 2004.
The adverse development experienced during the fourth quarter of 2004
occurred primarily in the property and casualty insurance segment. For many
years, the Company has required each branch office to perform a complete
inventory of its open claim files during the fourth quarter and to review the
adequacy of each carried reserve based on current information. This review
process has not historically resulted in a significant amount of adverse
development during the fourth quarter. However, heightened emphasis placed
on case reserve adequacy resulted in a higher level of scrutiny by the
Company's claims staff during the fourth quarter review process, which in
turn resulted in the increase in case reserves during the fourth quarter and
corresponding increase in settlement expense reserves.
The significant increase in case reserves that occurred during the fourth
quarter of 2004 was not anticipated since the branch offices had already
reviewed a large number of individual claim exposures for both previously
reported and newly reported claims during the year and had implemented
substantial increases in their case reserves during the second and third
quarters.
Beginning in 2005, the branch offices will be required to perform a complete
inventory and review of their case reserves semi-annually, rather than
annually as previously required. The first review will be performed during
the month of June and the second will be performed during the month of
November. This change is designed to implement necessary reserve adjustments
on a timely basis.
The Company has a conservative reserving philosophy and is dedicated to
maintaining a consistent level of reserve adequacy. Internal actuarial
evaluations completed in early February 2005 indicate that the loss and
settlement expense reserves carried by the property and casualty insurance
segment at December 31, 2004 are toward the high end of the range of
actuarial indications.
In addition to the recent actions taken to improve reserve adequacy,
effective March 1, 2005, Richard K. Schulz, a current employee of Employers
Mutual Casualty Company, will become the senior claims executive officer.
Mr. Schulz has been the claims manager at the Chicago branch office for the
last five years and has over ten years of prior insurance industry experience
in litigation management and claims supervision at Zurich US Insurance Group
and American States Insurance Company.
Although earnings for the twelve months ended December 31, 2004 have not been
finalized, management currently expects earnings to be within the range of
$1.10 per share to $1.15 per share. Management currently expects earnings
for 2005 to be within the range of $2.15 per share to $2.40 per share.
Actual 2004 earnings are expected to be released during market hours on the
morning of February 24, 2005. The Company will host an earnings call on the
date of release. Dial-in information for the call will be forthcoming.
The Company will also conduct a teleconference in conjunction with today's
release. The teleconference begins at 10:00 a.m. central time today, February
11, 2005. Dial-in information for the call is toll-free 1-877-407-8290. The
event will be archived and available for digital replay through February 18,
2005. The replay access information is toll-free 1-877-660-6853; account
number 1628; conference ID number 139412.
EMC Insurance Group Inc., the publicly-held insurance holding company of EMC
Insurance Companies, owns subsidiaries with operations in property and
casualty insurance and reinsurance. EMC Insurance Companies is one of the
largest property and casualty groups in Iowa and among the top 60 insurance
groups nationwide. For more information, visit our website
www.emcinsurance.com.
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 our industry, interest rates or the
performance of financial markets and the general economy; rating agency
actions and other risks and uncertainties inherent to the Company's business.
When we use the words "believe", "expect", "anticipate", "estimate" or
similar expressions, we intend to identify forward-looking statements. You
should not place undue reliance on these forward-looking statements.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EMC INSURANCE GROUP INC.
Registrant
/s/ Bruce G. Kelley
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Bruce G. Kelley
President & Chief Executive Officer
/s/ Mark E. Reese
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Mark E. Reese,
Sr. Vice President &
Chief Financial Officer
February 11, 2005