-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TI4NJqueenlSJkPn5uLVPOlZDxkD7R8RpI2AQj73uhaD5QAV+3m9HrMnpp2tOosk yRJUa2HRJFBPGFL65DOJJQ== 0000356130-03-000031.txt : 20030501 0000356130-03-000031.hdr.sgml : 20030501 20030501134030 ACCESSION NUMBER: 0000356130-03-000031 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030501 ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20030501 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMC INSURANCE GROUP INC CENTRAL INDEX KEY: 0000356130 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 426234555 STATE OF INCORPORATION: IA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-10956 FILM NUMBER: 03676164 BUSINESS ADDRESS: STREET 1: 717 MULBERRY ST CITY: DES MOINES STATE: IA ZIP: 50309 BUSINESS PHONE: 5152802902 MAIL ADDRESS: STREET 1: 717 MULBERRY STREET CITY: DES MOINES STATE: IA ZIP: 50309 8-K 1 may1press.txt MAY 1 PRESS RELEASE 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): May 1, 2003 ----------- EMC INSURANCE GROUP INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Iowa 0-10956 42-623455 - ------------------------------- ------------ -------------------- (State or other jurisdiction of (Commission (I.R.S. Employer incorporation) File Number) Identification No.) 717 Mulberry Street, Des Moines, Iowa 50309 - --------------------------------------- ---------- (Address of principal executive office) (Zip Code) (515) 280-2902 ---------------------------------------------------- (Registrant's telephone number, including area code) Item 9. Regulation FD Disclosure On May 1, 2003, EMC Insurance Group Inc. issued the following press release announcing the first quarter of 2003 financial results and Employers Mutual additional stock purchase program: EMC INSURANCE GROUP INC. REPORTS 2003 FIRST QUARTER RESULTS AND EMPLOYERS MUTUAL CASUALTY COMPANY, MAJORITY SHAREHOLDER, ANNOUNCES ADDITIONAL STOCK PURCHASE PROGRAM TO MAINTAIN 80 PERCENT OWNERSHIP THRESHOLD DES MOINES, Iowa (May 1, 2003)- EMC Insurance Group Inc. (Nasdaq/NM:EMCI) today reported operating income of $0.67 per share for the first quarter ended March 31, 2003 compared to operating income of $0.31 per share for the first quarter of 2002.(1) Net income, including realized investment losses/gains, totaled $6,446,000 ($0.57 per share) for the first quarter of 2003 compared to $3,690,000 ($0.33 per share) for the first quarter of 2002. Premiums earned increased 17.3 percent to $80,382,000 for the three months ended March 31, 2003 from $68,509,000 for the same period in 2002. This increase is primarily attributed to rate increases that were implemented during the last two years in the property and casualty insurance business and growth and improved pricing in the assumed reinsurance business. The Company continued to implement rate increases in the property and casualty insurance business during the first three months of 2003 and additional rate increases are anticipated for the remainder of 2003. These rate increases will be targeted to specific territories and lines of business and will generally be relatively modest compared to the rate increases implemented during the past several months. Catastrophe and storm losses increased slightly to $1,087,000 ($0.06 per share after tax) in the first quarter of 2003 compared to $883,000 ($0.05 per share after tax) for the first quarter of 2002. "The first quarter of 2003 was our most profitable first quarter ever," stated President and CEO Bruce G. Kelley. "We are thrilled that improved pricing, prudent risk selection and careful claim management combined to produce these excellent results." Net realized investment losses totaled $1,750,000 ($0.10 per share after tax) for the first quarter of 2003. Included in this amount is $1,567,000 of investment impairment losses recognized on the Company's equity portfolio and $4,342,000 of losses stemming from the sale of American Airlines and United Airlines bonds whose carrying values were no longer supported by the collateral backing these bonds. In addition, the Company's equity managers recognized $2,689,000 of losses on the sale of equity securities as they rebalanced the Company's equity portfolio to enhance future returns. These losses were largely offset by $6,854,000 of gains recognized on the sale of certain bond investments. The Company's GAAP combined ratio was 94.8 percent in the first quarter of 2003 compared to 103.8 percent in the first quarter of 2002. Net book value of the Company's stock as of March 31, 2003 was $14.31 per share, an increase from $13.84 per share at December 31, 2002. On April 9, 2003, Employers Mutual Casualty Company (Employers Mutual) announced that it would purchase up to 30,000 shares of the Company's common stock on the open market to maintain the 80 percent ownership threshold that it recently obtained. Due to a large number of option exercises by its employees, which result in the issuance of new shares of common stock, Employers Mutual has notified the Company that it will purchase up to an additional 30,000 shares of the Company's common stock on the open market in order to maintain the 80 percent ownership threshold. 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 insurance entities in Iowa and among the top 60 insurance entities nationwide. For more information, visit our website www.emcinsurance.com. - -------------------- The Private Securities Litigation Reform Act 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 expectations and actual results of the Company may differ materially from such expectations. 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; state and federal legislation and regulations; rate competition; changes in interest rates and the performance of financial markets; the adequacy of loss and settlement expense reserves, including asbestos and environmental claims; rate agency actions and other risks and uncertainties inherent to the Company's business. (1) The Company uses a non-GAAP financial measure called "operating income" that management believes is useful to investors because it illustrates the performance of our normal, ongoing operations, which is important in understanding and evaluating our financial condition and results of operations. While this measure is consistent with measures utilized by investors to evaluate performance, it is not a substitute for the U.S. GAAP financial measure of net income. Therefore, we have provided a reconciliation of this non_GAAP financial measure to the U.S. GAAP financial measure of net income in the Summary of Consolidated Financial Data schedule contained in this release. Management also uses non-GAAP financial measures for goal setting, determining employee and senior management awards and compensation, and evaluating performance. Summary of Consolidated Financial Data Three months ended March 31, ----------------------- 2003 2002 ----------- ----------- Premiums earned .......... $80,381,898 $68,509,392 Investment income ........ 7,846,924 8,258,711 Other income ............. 167,830 117,112 ----------- ----------- Total revenues ........... 88,396,652 76,885,215 Losses and expenses ...... 77,103,391 71,686,811 ----------- ----------- Operating income before income tax expense ..... 11,293,261 5,198,404 Income tax expense ....... 3,710,223 1,685,274 ----------- ----------- Operating income after income tax expense ... 7,583,038 3,513,130 ----------- ----------- Realized investment (losses) gains ......... (1,749,785) 271,919 Income tax (benefit) expense ................ (612,425) 95,172 ----------- ----------- Net realized investment (losses) gains ....... (1,137,360) 176,747 ----------- ----------- Net income ............... $ 6,445,678 $ 3,689,877 =========== =========== Operating income per share basic and diluted ...... $ .67 $ .31 =========== =========== Net income per share basic and diluted ...... $ .57 $ .33 =========== =========== Dividends per common share $ .15 $ .15 =========== =========== Average number of shares outstanding - basic and diluted ...... 11,403,353 11,341,184 =========== =========== Balance Sheet March 31, December 31, 2003 2002 ASSETS ------------ ------------ Investments: Fixed maturities: Securities held-to-maturity, at amortized cost (fair value $24,042,965 and $61,639,037) ... $ 21,476,624 $ 55,033,675 Securities available-for-sale, at fair value (amortized cost $386,938,234 and $459,844,928) .............................. 409,847,112 485,855,966 Fixed maturity securities on loan: Securities held-to-maturity, at amortized cost (fair value $34,037,584 and $0) ............ 30,493,983 - Securities available-for-sale, at fair value (amortized cost $60,640,191 and $0) ........ 61,466,503 - Equity securities available-for-sale, at fair value (cost $34,445,964 and $38,444,030) ..... 34,184,153 34,596,985 Other long-term investments, at cost ........... 3,533,273 3,057,000 Short-term investments, at cost ................ 44,259,595 29,650,230 ------------ ------------ Total investments ..................... 605,261,243 608,193,856 Balances resulting from related party transactions with Employers Mutual: Reinsurance receivables ...................... 11,274,401 11,582,136 Prepaid reinsurance premiums ................. 3,641,568 2,442,899 Intangible asset, defined benefit retirement plan ............................ 1,411,716 1,411,716 Other assets ................................. 4,226,720 1,331,816 Indebtedness of related party ................ 1,237,689 - Cash ............................................. 1,460,420 (119,097) Accrued investment income ........................ 7,350,209 9,179,555 Accounts receivable (net of allowance for uncollectible accounts of $7,297 and $7,297) ... 328,928 772,944 Income taxes recoverable ......................... - 213,504 Deferred policy acquisition costs ................ 25,520,400 24,926,861 Deferred income taxes ............................ 12,417,271 13,986,172 Goodwill, at cost less accumulated amortization of $2,616,234 and $2,616,234 ................... 941,586 941,586 Securities lending collateral .................... 98,037,048 - ------------ ------------ Total assets .......................... $773,109,199 $674,863,948 ============ ============ LIABILITIES Balances resulting from related party transactions with Employers Mutual: Losses and settlement expenses ............... $330,659,539 $331,226,753 Unearned premiums ............................ 119,643,383 115,746,814 Other policyholders' funds ................... 873,577 1,035,622 Surplus notes payable ........................ 36,000,000 36,000,000 Indebtedness to related party ................ - 3,304,539 Employee retirement plans .................... 10,492,291 10,014,349 Other liabilities ............................ 12,800,676 19,767,507 Income taxes payable ............................. 1,273,666 - Securities lending obligation .................... 98,037,048 - ------------ ------------ Total liabilities ......................... 609,780,180 517,095,584 ------------ ------------ STOCKHOLDERS' EQUITY Common stock, $1 par value, authorized 20,000,000 shares; issued and outstanding, 11,410,913 shares in 2003 and 11,399,050 shares in 2002 ... 11,410,913 11,399,050 Additional paid-in capital ....................... 67,470,088 67,270,591 Accumulated other comprehensive income ........... 15,069,430 14,218,330 Retained earnings ................................ 69,378,588 64,880,393 ------------ ------------ Total stockholders' equity ................ 163,329,019 157,768,364 ------------ ------------ Total liabilities and stockholders' equity $773,109,199 $674,863,948 ============ ============ Segment Information Property Three Months Ended and casualty Parent March 31, 2003 insurance Reinsurance company Consolidated - ----------------- ------------ ------------ ------------ ------------ Premiums earned ......... $ 59,205,804 $ 21,176,094 $ - $ 80,381,898 Losses and expenses ..... 54,735,713 21,473,164 - 76,208,877 ------------ ------------ ------------ ------------ Underwriting gain (loss) 4,470,091 (297,070) - 4,173,021 Net investment income ... 5,550,937 2,245,755 50,232 7,846,924 Other income ............ 167,830 - - 167,830 Interest expense ........ 339,987 145,979 - 485,966 Other expenses .......... 277,184 - (131,364 408,548 ------------ ------------ ------------ ------------ Operating income (loss) before income tax expense (benefit) ..... 9,571,687 1,802,706 (81,132) 11,293,261 Realized investment losses ............... (1,358,914) (390,871) - (1,749,785) ------------ ------------ ------------ ------------ Income (loss) before income tax expense (benefit) ............. $ 8,212,773 $ 1,411,835 $ (81,132)$ 9,543,476 ============ ============ ============ ============ Property Three Months Ended and casualty Parent March 31, 2002 insurance Reinsurance company Consolidated - ----------------- ------------ ------------ ------------ ------------ Premiums earned ......... $ 52,443,570 $ 16,065,822 $ - $ 68,509,392 Losses and expenses ..... 53,633,572 17,463,866 - 71,097,438 ------------ ------------ ------------ ------------ Underwriting loss ....... (1,190,022) (1,398,044) - (2,588,046) Net investment income ... 6,007,617 2,219,379 31,715 8,258,711 Other income ............ 117,112 - - 117,112 Interest expense ........ 331,644 - - 331,644 Other expenses .......... 151,228 - 106,501 257,729 ------------ ------------ ------------ ------------ Operating income (loss) before income tax expense (benefit) ..... 4,451,855 821,335 (74,786) 5,198,404 Realized investment gains 248,960 22,959 - 271,919 ------------ ------------ ------------ ------------ Income (loss) before income tax expense (benefit) ............. $ 4,700,815 $ 844,294 $ (74,786)$ 5,470,323 ============ ============ ============ ============ Three Months ended March 31, -------------------------- Written premiums 2003 2002 ----------- ----------- Property & casualty insurance ........ $60,022,622 $54,843,250 Reinsurance .......................... 23,301,452 17,296,985 ----------- ----------- Total $83,324,074 $72,140,235 =========== =========== March 31, Other data: 2003 2002 - -------------------------------------------------------------------- Book Value Per Share .............. $14.31 $12.19 Price to Book Value ............... 1.32x 1.63x Common stock price: High ......................... $19.45 $19.90 Low .......................... $15.50 $15.95 Close ........................ $18.90 $19.89 Effective tax rate ................ 32.5% 32.5% Annualized Data - ----------------------------------- Net income as a percent of beginning stockholders' equity .. 16.3% 10.5% Average ROE ....................... 16.1% 10.6% P/E Multiple (price/last 4 qtrs) .. 11.4x (497.3x) 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 ------------------------- Bruce G. Kelley President & Chief Executive Officer /s/ Mark E. Reese ------------------------- Mark E. Reese, Vice President & Chief Financial Officer May 1, 2003 -----END PRIVACY-ENHANCED MESSAGE-----