ex99_1.htm

“We are pleased with our improved performance in 2009,” stated Bruce G. Kelley, President and Chief Executive Officer. “2009 operating results for the property and casualty insurance segment were in line with our expectations,” continued Kelley. “Premium rates began stabilizing during the second quarter, but did not improve to the extent we anticipated one year ago due to the lagging effects of the weak economy. Premium rates did improve somewhat in the personal lines of business during the second half of the year, but the commercial lines of business, which account for more than 80% of our property and casualty insurance premiums, remained very competitive. Pricing in the reinsurance marketplace improved with the January 1 renewals, but declined somewhat as the year progressed. ”

Kelley went on to say that, “storm losses, while higher than average due to active Midwest weather patterns, were significantly lower than the record amount experienced in 2008. This reduction in storm losses, coupled with some favorable reserve development and a significant increase in the market value of our investment portfolio, contributed to a 22.5% increase in the book value of our stock.”

The Company experienced $9,383,000 ($0.47 per share after tax) of favorable development on prior years’ reserves during the fourth quarter of 2009 compared to $5,127,000 ($0.25 per share after tax) in the fourth quarter of 2008. The amount for 2009 includes $4,160,000 ($0.21 per share after tax) of favorable reserve development in the reinsurance subsidiary that resulted from a reduction in the bulk IBNR reserve and the winding down of the MAERP Reinsurance Association. For the year ended December 31, 2009, favorable development on prior years’ reserves totaled $48,622,000 ($2.39 per share after tax) compared to $35,308,000 ($1.70 per share after tax) in 2008. Included in the above amounts is $507,000 ($0.03 per share after tax) and $3,476,000 ($0.17 per share after tax) of favorable development on prior years’ catastrophe and storm loss reserves during the fourth quarter and year ended December 31, 2009. For comparative purposes, favorable development on prior years’ catastrophe and storm loss reserves totaled $355,000 ($0.02 per share after tax) and $1,711,000 ($0.08 per share after tax) for the same periods in 2008.

Catastrophe and storm losses totaled $520,000 ($0.03 per share after tax) in the fourth quarter of 2009 compared to $2,058,000 ($0.10 per share after tax) in the fourth quarter of 2008. Catastrophe and storm losses for the year ended December 31, 2009 totaled $31,465,000 ($1.55 per share after tax) compared to a record $52,484,000 ($2.52 per share after tax) in 2008. Catastrophe and storm losses accounted for 8.2 percentage points of the combined ratio for the year ended December 31, 2009, which is higher than the 8-year average of 6.5 percentage points for the period 2000 to 2007, but significantly lower than the record 13.5 percentage points experienced in 2008.

Large losses, which the Company defines as losses greater than $250,000, excluding catastrophe and storm losses, declined to $7,650,000 ($0.58 per share after taxes) in the fourth quarter of 2009 from $8,923,000 ($0.67 per share after taxes) in the fourth quarter of 2008. For the year ended December 31, 2009, large losses totaled $22,938,000 ($1.74 per share after taxes), compared to $24,895,000 ($1.84 per share after taxes) in 2008.

As of December 31, 2009, 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 standard time on February 25, 2010 to allow securities analysts, stockholders and other interested parties the opportunity to hear management discuss the Company’s results for the year ended December 31, 2009, as well as its expectations for the ensuing 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 March 11, 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 342676.

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 May 25, 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., 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 entities in Iowa and among the top 60 insurance entities nationwide based on premium volume. 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:

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.

	Property and
	Casualty						Parent
Quarter Ended December 31, 2009	Insurance			Reinsurance			Company			Consolidated
Revenues:
Premiums earned	$	77,520,877		$	21,204,653		$	-		$	98,725,530
Investment income, net		9,345,570			3,163,326			(4,253	)		12,504,643
Other income		177,186			2,543			-			179,729
		87,043,633			24,370,522			(4,253	)		111,409,902
Losses and expenses:
Losses and settlement expenses		49,291,089			8,241,260			-			57,532,349
Dividends to policyholders		1,816,687			-			-			1,816,687
Amortization of deferred policy acquisition costs		19,928,255			4,085,472			-			24,013,727
Other underwriting expenses		9,149,267			932,926			-			10,082,193
Interest expense		225,000			-			-			225,000
Other expenses		240,999			(364,633	)		315,755			192,121
		80,651,297			12,895,025			315,755			93,862,077
Operating income (loss) before income taxes		6,392,336			11,475,497			(320,008	)		17,547,825
Realized investment gains		22,641,978			46,126			-			22,688,104
Income (loss) before income taxes		29,034,314			11,521,623			(320,008	)		40,235,929
Income tax expense (benefit):
Current		7,310,872			2,018,308			(112,002	)		9,217,178
Deferred		1,818,792			1,651,115			-			3,469,907
		9,129,664			3,669,423			(112,002	)		12,687,085
Net income (loss)	$	19,904,650		$	7,852,200		$	(208,006	)	$	27,548,844
Average shares outstanding											13,113,534
Per Share Data:
Net income (loss) per share - basic and diluted	$	1.52		$	0.60		$	(0.02	)	$	2.10
Catastrophe and storm losses (after tax)	$	0.04		$	(0.07	)	$	-		$	(0.03	)
Dividends per share										$	0.18
Other Information of Interest:
Net written premiums	$	63,193,817		$	20,937,704		$	-		$	84,131,521
Catastrophe and storm losses	$	(809,043	)	$	1,328,769		$	-		$	519,726
GAAP Combined Ratio:
Loss ratio		63.6	%		38.9	%		-			58.3	%
Expense ratio		39.8	%		23.6	%		-			36.4	%
		103.4	%		62.5	%		-			94.7	%

	Property and
	Casualty						Parent
Quarter Ended December 31, 2008	Insurance			Reinsurance			Company			Consolidated
Revenues:
Premiums earned	$	79,084,507		$	22,228,595		$	-		$	101,313,102
Investment income, net		9,217,233			2,971,962			23,399			12,212,594
Other income		127,440			-			-			127,440
		88,429,180			25,200,557			23,399			113,653,136
Losses and expenses:
Losses and settlement expenses		52,857,706			19,419,641			-			72,277,347
Dividends to policyholders		2,794,081			-			-			2,794,081
Amortization of deferred policy acquisition costs		19,071,697			4,136,793			-			23,208,490
Other underwriting expenses		7,542,183			982,948			-			8,525,131
Interest expense		225,000			-			-			225,000
Other expenses		156,242			(303,559	)		333,095			185,778
		82,646,909			24,235,823			333,095			107,215,827
Operating income (loss) before income taxes		5,782,271			964,734			(309,696	)		6,437,309
Realized investment losses		(5,527,907	)		(2,290,108	)		-			(7,818,015	)
Income (loss) before income taxes		254,364			(1,325,374	)		(309,696	)		(1,380,706	)
Income tax benefit:
Current		(3,817,402	)		(2,232,060	)		(108,394	)		(6,157,856	)
Deferred		2,925,053			1,378,557			-			4,303,610
		(892,349	)		(853,503	)		(108,394	)		(1,854,246	)
Net income (loss)	$	1,146,713		$	(471,871	)	$	(201,302	)	$	473,540
Average shares outstanding											13,290,907
Per Share Data:
Net income (loss) per share - basic and diluted	$	0.09		$	(0.04	)	$	(0.01	)	$	0.04
Catastrophe and storm losses (after tax)	$	(0.02	)	$	(0.08	)	$	-		$	(0.10	)
Dividends per share										$	0.18
Other Information of Interest:
Net written premiums	$	63,312,384		$	22,127,584		$	-		$	85,439,968
Catastrophe and storm losses	$	469,178		$	1,588,738		$	-		$	2,057,916
GAAP Combined Ratio:
Loss ratio		66.8	%		87.4	%		-			71.3	%
Expense ratio		37.2	%		23.0	%		-			34.1	%
		104.0	%		110.4	%		-			105.4	%

	Property and
	Casualty						Parent
Year Ended December 31, 2009	Insurance			Reinsurance			Company			Consolidated
Revenues:
Premiums earned	$	308,079,036		$	75,931,865		$	-		$	384,010,901
Investment income, net		35,679,586			12,069,177			10,543			47,759,306
Other income		752,635			2,543			-			755,178
		344,511,257			88,003,585			10,543			432,525,385
Losses and expenses:
Losses and settlement expenses		199,124,285			49,625,174			-			248,749,459
Dividends to policyholders		9,090,655			-			-			9,090,655
Amortization of deferred policy acquisition costs		73,409,970			14,582,779			-			87,992,749
Other underwriting expenses		36,841,268			2,175,711			-			39,016,979
Interest expense		900,000			-			-			900,000
Other expenses		855,846			(29,237	)		1,346,388			2,172,997
		320,222,024			66,354,427			1,346,388			387,922,839
Operating income (loss) before income taxes		24,289,233			21,649,158			(1,335,845	)		44,602,546
Realized investment gains (losses)		19,581,814			(1,659,543	)		-			17,922,271
Income (loss) before income taxes		43,871,047			19,989,615			(1,335,845	)		62,524,817
Income tax expense (benefit):
Current		11,296,988			4,886,576			(467,545	)		15,716,019
Deferred		735,709			702,475			-			1,438,184
		12,032,697			5,589,051			(467,545	)		17,154,203
Net income (loss)	$	31,838,350		$	14,400,564		$	(868,300	)	$	45,370,614
Average shares outstanding											13,207,105
Per Share Data:
Net income (loss) per share - basic and diluted	$	2.41		$	1.09		$	(0.06	)	$	3.44
Catastrophe and storm losses (after tax)	$	(1.37	)	$	(0.18	)	$	-		$	(1.55	)
Dividends per share										$	0.72
Book value per share										$	26.11
Effective tax rate											27.4	%
Annualized net income as a percent of beg. SH equity											16.0	%
Other Information of Interest:
Net written premiums	$	312,814,883		$	75,901,429		$	-		$	388,716,312
Catastrophe and storm losses	$	27,898,729		$	3,565,791		$	-		$	31,464,520
GAAP Combined Ratio:
Loss ratio		64.6	%		65.4	%		-			64.8	%
Expense ratio		38.8	%		22.0	%		-			35.4	%
		103.4	%		87.4	%		-			100.2	%

	Property and
	Casualty						Parent
Year Ended December 31, 2008	Insurance			Reinsurance			Company			Consolidated
Revenues:
Premiums earned	$	315,598,049		$	73,719,749		$	-		$	389,317,798
Investment income, net		36,329,609			11,912,452			161,312			48,403,373
Other income		626,499			-			-			626,499
		352,554,157			85,632,201			161,312			438,347,670
Losses and expenses:
Losses and settlement expenses		232,538,251			61,727,042			-			294,265,293
Dividends to policyholders		5,822,521			-			-			5,822,521
Amortization of deferred policy acquisition costs		73,064,705			14,799,244			-			87,863,949
Other underwriting expenses		30,989,615			2,709,106			-			33,698,721
Interest expense		889,375			-			-			889,375
Other expenses		568,848			(256,599	)		1,330,077			1,642,326
		343,873,315			78,978,793			1,330,077			424,182,185
Operating income (loss) before income taxes		8,680,842			6,653,408			(1,168,765	)		14,165,485
Realized investment losses		(16,811,900	)		(7,643,639	)		-			(24,455,539	)
Loss before income taxes		(8,131,058	)		(990,231	)		(1,168,765	)		(10,290,054	)
Income tax expense (benefit):
Current		(6,833,429	)		(805,907	)		(409,068	)		(8,048,404	)
Deferred		522,159			(1,058,436	)		-			(536,277	)
		(6,311,270	)		(1,864,343	)		(409,068	)		(8,584,681	)
Net income (loss)	$	(1,819,788	)	$	874,112		$	(759,697	)	$	(1,705,373	)
Average shares outstanding											13,534,147
Per Share Data:
Net income (loss) per share - basic and diluted	$	(0.14	)	$	0.06		$	(0.05	)	$	(0.13	)
Catastrophe and storm losses (after tax)	$	(2.13	)	$	(0.39	)	$	-		$	(2.52	)
Dividends per share										$	0.72
Book value per share										$	21.32
Effective tax rate											(83.4	)%
Annualized net income as a percent of beg. SH equity											(0.5	)%
Other Information of Interest:
Net written premiums	$	312,987,369		$	73,617,740		$	-		$	386,605,109
Catastrophe and storm losses	$	44,439,082		$	8,045,176		$	-		$	52,484,258
GAAP Combined Ratio:
Loss ratio		73.7	%		83.7	%		-			75.6	%
Expense ratio		34.8	%		23.8	%		-			32.7	%
		108.5	%		107.5	%		-			108.3	%

	December 31,
	2009		2008
ASSETS
Investments:
Fixed maturities:
Securities held-to-maturity, at amortized cost (fair value $460,877 and $572,852)	$	410,005	$	534,759
Securities available-for-sale, at fair value (amortized cost $858,129,177 and $821,306,951)		884,688,114		812,868,835
Fixed maturity securities on loan:
Securities available-for-sale, at fair value (amortized cost $14,065,597 and $8,923,745)		14,492,872		8,950,052
Equity securities available-for-sale, at fair value (cost $73,114,920 and $75,025,666)		90,189,979		88,372,207
Other long-term investments, at cost		47,083		66,974
Short-term investments, at cost		55,390,096		54,373,082
Total investments		1,045,218,149		965,165,909

Balances resulting from related party transactions with
Employers Mutual:
Reinsurance receivables		30,544,558		36,355,047
Prepaid reinsurance premiums		5,112,386		4,157,055
Deferred policy acquisition costs		36,650,628		34,629,429
Other assets		2,058,189		2,534,076

Cash		278,534		182,538
Accrued investment income		11,082,132		12,108,129
Accounts receivable		1,611,740		23,041
Income taxes recoverable		-		11,859,539
Deferred income taxes		15,044,357		30,819,592
Goodwill		941,586		941,586
Securities lending collateral		14,941,880		9,322,863
Other assets		2,303,654		-
Total assets	$	1,165,787,793	$	1,108,098,804

	December 31,
	2009			2008
LIABILITIES
Balances resulting from related party transactions with
Employers Mutual:
Losses and settlement expenses	$	553,787,770		$	573,031,853
Unearned premiums		159,486,096			154,446,205
Other policyholders' funds		7,918,665			6,418,870
Surplus notes payable		25,000,000			25,000,000
Indebtedness to related party		13,488,724			20,667,196
Employee retirement plans		18,176,720			19,331,007
Other liabilities		20,335,197			16,964,452

Losses and settlement expenses		2,363,807			-
Income taxes payable		5,488,760			-
Securities lending obligation		14,941,880			9,322,863
Other liabilities		2,382,489			-
Total liabilities		823,370,108			825,182,446

STOCKHOLDERS' EQUITY
Common stock, $1 par value, authorized 20,000,000 shares; issued and outstanding, 13,114,481 shares in 2009 and 13,267,668 shares in 2008		13,114,481			13,267,668
Additional paid-in capital		92,804,282			95,639,349
Accumulated other comprehensive income (loss):
Unrealized net losses on fixed income securities with OTTI		(104,847	)		-
Other unrealized net gains		28,744,673			3,207,576
Employee retirement plans		(12,587,484	)		(13,137,688	)
Total accumulated other comprehensive income (loss)		16,052,342			(9,930,112	)
Retained earnings		220,446,580			183,939,453
Total stockholders' equity		342,417,685			282,916,358
Total liabilities and stockholders' equity	$	1,165,787,793		$	1,108,098,804

	December 31, 2009
					Percent of
	Amortized		Fair		Total			Carrying
($ in thousands)	Cost		Value		Fair Value			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

	December 31, 2008
					Percent of
	Amortized		Fair		Total			Carrying
($ in thousands)	Cost		Value		Fair Value			Value
Fixed maturity securities held-to-maturity	$	535	$	573		0.1	%	$	535
Fixed maturity securities available-for-sale		830,231		821,819		85.1	%		821,819
Equity securities available-for-sale		75,026		88,372		9.2	%		88,372
Cash		182		182		-			182
Short-term investments		54,373		54,373		5.6	%		54,373
Other long-term investments		67		67		-			67
	$	960,414	$	965,386		100.0	%	$	965,348

	Three Months Ended						Twelve Months Ended
	December 31, 2009						December 31, 2009
				Percent of						Percent of
				Increase/						Increase/
	Percent of			(Decrease) in			Percent of			(Decrease) in
	Net Written			Net Written			Net Written			Net Written
	Premiums			Premiums			Premiums			Premiums
Property and Casualty Insurance
Commercial Lines:
Automobile		15.9	%		(1.1	) %		16.7	%		(3.3	) %
Liability		13.8	%		(12.4	) %		15.9	%		(7.9	) %
Property		14.9	%		2.3	%		16.4	%		4.0	%
Workers' Compensation		13.6	%		(8.1	) %		17.1	%		-	%
Other		2.2	%		(1.0	) %		2.2	%		(2.7	) %
Total Commercial Lines		60.4	%		(4.8	) %		68.3	%		(2.0	) %

Personal Lines:
Automobile		9.3	%		40.0	%		7.2	%		22.3	%
Property		5.3	%		5.3	%		4.9	%		0.4	%
Liability		0.1	%		(10.7	) %		0.1	%		(6.9	) %
Total Personal Lines		14.7	%		24.6	%		12.2	%		12.1	%
Total Property and Casualty Insurance		75.1	%		(0.2	) %		80.5	%		(0.1	) %

Reinsurance		24.9	%		(5.4	) %		19.5	%		3.1	%
Total		100.0	%		(1.5	) %		100.0	%		0.5	%