ex99.htm

“We are very pleased with our third quarter results, despite another quarter of above average storm losses,” stated Bruce G. Kelley, President and Chief Executive Officer. “As in previous quarters, none of the storm losses were large enough to trigger our reinsurance coverage, so we retained all the losses,” continued Kelley. “Storm losses added 19.6 percentage points to the combined ratio for the third quarter, which is 8.7 percentage points greater than the ten-year third quarter average of 10.9 percentage points. Catastrophe and storm losses have added 13.7 percentage points to the year-to-date combined ratio, which is 5.3 percentage points greater than the ten-year year-to-date average of 8.4 percentage points.”

Premiums earned increased 0.6 percent to $97,284,000 in the third quarter of 2010 from $96,733,000 for the same period in 2009. For the nine months ended September 30, 2010, premiums earned increased 0.3 percent to $286,060,000 from $285,285,000 in 2009. “Our underlying book of business remains sound despite continued strong competition in the commercial lines of business,” continued Kelley. “We continue to implement moderate rate increases in our personal lines of business, and are increasing rates in our commercial lines of business when we have the opportunity to do so,” said Kelley. “Retention of quality business and profitable organic growth remain top priorities as we continue to manage through the soft market.”

Investment income increased 3.6 percent to $12,235,000 for the third quarter of 2010 from $11,805,000 for the same period in 2009. For the nine months ended September 30, 2010, investment income increased 6.1 percent to $37,414,000 from $35,255,000 in 2009. These increases are 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 in the fourth quarter of 2009.

Large losses, defined as losses greater than $500,000 for the pool (or $150,000 for the Company), excluding catastrophe and storm losses, increased to $6,608,000 ($0.33 per share after tax) in the third quarter of 2010 from $3,275,000 ($0.16 per share after tax) in the third quarter of 2009. For the nine-month period ended September 30, 2010, large losses increased to $13,579,000 ($0.67 per share after tax) from $10,733,000 ($0.53 per share after taxes) in 2009.

The Company experienced $18,821,000 ($0.94 per share after tax) of favorable development on prior years’ reserves in the third quarter of 2010, compared to $8,746,000 ($0.43 per share after tax) in the third quarter of 2009. For the nine-month period ended September 30, 2010, the Company experienced $46,187,000 ($2.30 per share after tax) of favorable development on prior years’ reserves, compared to $39,239,000 ($1.93 per share after tax) in 2009. Included in the third quarter 2010 amount is $36,000 ($0.00 per share after tax) of favorable development experienced on prior years’ catastrophe and storm loss reserves, compared to $833,000 ($0.04 per share after tax) in the third quarter of 2009. Included in the amount for the nine-month period ended September 30, 2010 is $325,000 ($0.02 per share after tax) of adverse development experienced on prior years’ catastrophe and storm loss reserves, compared to $2,969,000 ($0.15 per share after tax) of favorable development in 2009.

“Other-than-temporary” investment impairment losses totaled $366,000 in the third quarter of 2010 compared to $611,000 in the third quarter of 2009. For the nine-month period ended September 30, 2010, “other-than-temporary” investment impairment losses totaled $2,295,000, compared to $9,727,000 in 2009. The securities “other-than-temporarily” impaired during the first nine months of 2010 include 22 equity securities and two fixed maturity securities.

During the third quarter of 2010 the Company repurchased 188,800 shares of its common stock at an average cost of $21.49 per share. Since the inception of the repurchase program in March, 2008, the Company has repurchased 980,433 shares of common stock at a cost of approximately $23.1 million, leaving approximately $1.9 million available for the repurchase of additional shares. 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 November 8, 2010 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, 2010, as well as its expectations for the remainder of the year. Dial-in information for the call is toll-free 1-877-407-8035 (International: 1-201-689-8035). The event will be archived and available for digital replay through November 24, 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 358605.

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 February 8, 2011. 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, 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.

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.

	September 30,		December 31,
	2010		2009
ASSETS
Investments:
Fixed maturities:
Securities held-to-maturity, at amortized cost (fair value $398,488 and $460,877)	$	352,655	$	410,005
Securities available-for-sale, at fair value (amortized cost $884,407,173 and $858,129,177)		949,935,129		884,688,114
Fixed maturity securities on loan:
Securities available-for-sale, at fair value (amortized cost $786,221 and $14,065,597)		850,909		14,492,872
Equity securities available-for-sale, at fair value (cost $74,048,368 and $73,114,920)		92,443,462		90,189,979
Other long-term investments, at cost		34,917		47,083
Short-term investments, at cost		46,017,719		55,390,096
Total investments		1,089,634,791		1,045,218,149

Cash		357,300		278,534
Reinsurance receivables due from affiliate		32,386,659		30,544,558
Prepaid reinsurance premiums due from affiliate		9,699,324		5,112,386
Deferred policy acquisition costs (all affiliated)		41,214,399		36,650,628
Amounts due from affiliate to settle quarterly transaction balances		9,409,595		-
Accrued investment income		11,730,474		11,082,132
Accounts receivable		2,341,292		1,611,740
Income taxes recoverable		2,530,044		-
Deferred income taxes		144,853		15,044,357
Goodwill		941,586		941,586
Securities lending collateral		891,738		14,941,880
Other assets (affiliated $3,541,432 and $2,058,189)		3,680,553		4,361,843
Total assets	$	1,204,962,608	$	1,165,787,793

	September 30,			December 31,
	2010			2009
LIABILITIES
Losses and settlement expenses (affiliated $564,358,163 and $553,787,770)	$	567,249,077		$	556,151,577
Unearned premiums due to affiliate		183,185,885			159,486,096
Other policyholders' funds due to affilate		7,503,467			7,918,665
Surplus notes payable to affiliate		25,000,000			25,000,000
Amounts due affiliate to settle quarterly transaction balances		-			13,488,724
Employee retirement benefits payable to affiliate		21,107,292			18,176,720
Income taxes payable		-			5,488,760
Securities lending obligation		891,738			14,941,880
Other liabilities (affiliated $15,735,057 and $20,335,197)		21,953,035			22,717,686
Total liabilities		826,890,494			823,370,108

STOCKHOLDERS' EQUITY
Common stock, $1 par value, authorized 20,000,000shares; issued and outstanding, 12,911,410shares in 2010 and 13,114,481 shares in 2009		12,911,410			13,114,481
Additional paid-in capital		88,581,022			92,804,282
Accumulated other comprehensive income (loss):
Net unrealized gains (losses) on fixed maturity securities with "other-than-temporary" impairments		73,549			(104,847	)
Other net unrealized gains		54,518,480			28,744,673
Employee retirement benefits payable to affiliate		(12,036,039	)		(12,587,484	)
Total accumulated other comprehensive income		42,555,990			16,052,342
Retained earnings		234,023,692			220,446,580
Total stockholders' equity		378,072,114			342,417,685
Total liabilities and stockholders' equity	$	1,204,962,608		$	1,165,787,793

	Property and
	Casualty						Parent
Quarter Ended September 30, 2010	Insurance			Reinsurance			Company			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	%

	Property and
	Casualty						Parent
Quarter Ended September 30, 2009	Insurance			Reinsurance			Company			Consolidated
Revenues:
Premiums earned	$	77,929,827		$	18,802,990		$	-		$	96,732,817
Investment income, net		8,781,681			3,022,390			739			11,804,810
Other income		224,191			-			-			224,191
		86,935,699			21,825,380			739			108,761,818
Losses and expenses:
Losses and settlement expenses		58,006,003			14,270,242			-			72,276,245
Dividends to policyholders		1,517,886			-			-			1,517,886
Amortization of deferred policy acquisition costs		16,308,495			4,137,666			-			20,446,161
Other underwriting expenses		9,329,480			167,705			-			9,497,185
Interest expense		225,000			-			-			225,000
Other expenses		208,518			728,520			312,684			1,249,722
		85,595,382			19,304,133			312,684			105,212,199
Operating income (loss) before income taxes		1,340,317			2,521,247			(311,945	)		3,549,619
Realized investment gains		2,030,639			890,671			-			2,921,310
Income (loss) before income taxes		3,370,956			3,411,918			(311,945	)		6,470,929
Income tax expense (benefit):
Current		(776,905	)		957,543			(109,181	)		71,457
Deferred		1,406,999			(58,302	)		-			1,348,697
		630,094			899,241			(109,181	)		1,420,154
Net income (loss)	$	2,740,862		$	2,512,677		$	(202,764	)	$	5,050,775
Average shares outstanding											13,229,225
Per Share Data:
Net income (loss) per share - basic and diluted	$	0.21		$	0.19		$	(0.02	)	$	0.38
Decrease in provision for insured events of prior years (after tax)	$	0.32		$	0.11		$	-		$	0.43
Catastrophe and storm losses (after tax)	$	(0.81	)	$	0.02		$	-		$	(0.79	)
Dividends per share										$	0.18
Other Information of Interest:
Net written premiums	$	97,034,608		$	19,442,851		$	-		$	116,477,459
Decrease in provision for insured events of prior years	$	(6,567,548	)	$	(2,178,218	)	$	-		$	(8,745,766	)
Catastrophe and storm losses	$	16,353,571		$	(321,631	)	$	-		$	16,031,940
GAAP Combined Ratio:
Loss ratio		74.4	%		75.9	%		-			74.7	%
Expense ratio		34.9	%		22.9	%		-			32.5	%
		109.3	%		98.8	%		-			107.2	%

	Property and
	Casualty						Parent
Nine Months Ended September 30, 2010	Insurance			Reinsurance			Company			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	%

	Property and
	Casualty						Parent
Nine Months Ended September 30, 2009	Insurance			Reinsurance			Company			Consolidated
Revenues:
Premiums earned	$	230,558,159		$	54,727,212		$	-		$	285,285,371
Investment income, net		26,334,016			8,905,851			14,796			35,254,663
Other income		575,449			-			-			575,449
		257,467,624			63,633,063			14,796			321,115,483
Losses and expenses:
Losses and settlement expenses		149,833,196			41,383,914			-			191,217,110
Dividends to policyholders		7,273,968			-			-			7,273,968
Amortization of deferred policy acquisition costs		53,481,715			10,497,307			-			63,979,022
Other underwriting expenses		27,692,001			1,242,785			-			28,934,786
Interest expense		675,000			-			-			675,000
Other expenses		614,847			335,396			1,030,633			1,980,876
		239,570,727			53,459,402			1,030,633			294,060,762
Operating income (loss) before income taxes		17,896,897			10,173,661			(1,015,837	)		27,054,721
Realized investment losses		(3,060,164	)		(1,705,669	)		-			(4,765,833	)
Income (loss) before income taxes		14,836,733			8,467,992			(1,015,837	)		22,288,888
Income tax expense (benefit):
Current		3,986,116			2,868,268			(355,543	)		6,498,841
Deferred		(1,083,083	)		(948,640	)		-			(2,031,723	)
		2,903,033			1,919,628			(355,543	)		4,467,118
Net income (loss)	$	11,933,700		$	6,548,364		$	(660,294	)	$	17,821,770
Average shares outstanding											13,238,296
Per Share Data:
Net income (loss) per share - basic and diluted	$	0.90		$	0.49		$	(0.04	)	$	1.35
Decrease in provision for insured events of prior years (after tax)	$	1.53		$	0.40		$	-		$	1.93
Catastrophe and storm losses (after tax)	$	(1.41	)	$	(0.11	)	$	-		$	(1.52	)
Dividends per share										$	0.54
Book value per share										$	25.41
Effective tax rate											20.0	%
Annualized net income as a percent of beg. SH equity											8.4	%
Other Information of Interest:
Net written premiums	$	249,621,066		$	54,963,725		$	-		$	304,584,791
Decrease in provision for insured events of prior years	$	(31,192,291	)	$	(8,046,898	)	$	-		$	(39,239,189	)
Catastrophe and storm losses	$	28,707,772		$	2,237,022		$	-		$	30,944,794
GAAP Combined Ratio:
Loss ratio		65.0	%		75.6	%		-			67.0	%
Expense ratio		38.3	%		21.5	%		-			35.1	%
		103.3	%		97.1	%		-			102.1	%

	September 30, 2010
					Percent of
	Amortized		Fair		Total			Carrying
($ in thousands)	Cost		Value		Fair Value			Value
Fixed maturity securities held-to-maturity	$	353	$	398		0.1	%	$	353
Fixed maturity securities available-for-sale		885,193		950,786		87.2	%		950,786
Equity securities available-for-sale		74,048		92,443		8.5	%		92,443
Cash		357		357		-			357
Short-term investments		46,018		46,018		4.2	%		46,018
Other long-term investments		35		35		-			35
	$	1,006,004	$	1,090,037		100.0	%	$	1,089,992

	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

	Three Months Ended						Nine Months Ended
	September 30, 2010						September 30, 2010
				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		15.8	%		(1.8	) %		17.0	%		1.3	%
Liability		14.3	%		(9.5	) %		15.1	%		(7.5	) %
Property		17.9	%		(0.2	) %		17.4	%		4.2	%
Workers' Compensation		20.4	%		(6.2	) %		17.3	%		(3.7	) %
Other		1.9	%		(9.4	) %		2.0	%		(6.8	) %
Total Commercial Lines		70.3	%		(4.6	) %		68.8	%		(1.6	) %

Personal Lines:
Automobile		6.0	%		(4.6	) %		7.2	%		10.4	%
Property		4.9	%		3.4	%		4.5	%		(4.6	) %
Liability		0.1	%		(10.3	) %		0.1	%		(6.4	) %
Total Personal Lines		11.0	%		(1.3	) %		11.8	%		4.0	%
Total Property and Casualty Insurance		81.3	%		(4.1	) %		80.6	%		(0.8	) %

Reinsurance		18.7	%		9.8	%		19.4	%		7.6	%
Total		100.0	%		(1.8	) %		100.0	%		0.7	%

	FOR IMMEDIATE RELEASE

	Contact: Anita Novak (Investors)
	515-345-2515
	Lisa Hamilton (Media)
	515-345-7589