EMC Insurance Group Inc. Announces Third Quarter Operating Income & Combined Ratio Estimates & Revises 2014 Operating Income ...
October 24 2014 - 6:30AM
Business Wire
EMC Insurance Group Inc. (NASDAQ:EMCI) (the “Company”) today
announced that third quarter 2014 operating results were impacted
by a higher than anticipated level of losses. Management
anticipates that the Company will report third quarter 2014
operating income1 in the range of $0.11 to $0.15 per share, and
that the GAAP combined ratio for the third quarter will be
approximately 107.9 percent.
“We continue to benefit from rate increases implemented over the
past several years; however, due to an increase in both large
losses, stemming from auto accidents and many fires, and
catastrophe and storm losses, third quarter results were below our
expectations,” stated President and Chief Executive Officer Bruce
G. Kelley. “The reinsurance segment is expected to report an
unusually high GAAP combined ratio for the third quarter of
approximately 121.5 percent, compared to 91.2 percent reported in
2013, while the property and casualty insurance segment is expected
to report a GAAP combined ratio of 104.1 percent, compared to 103.9
percent in 2013.”
Large losses, which the Company defines as losses greater than
$500,000 for the EMC Insurance Companies pool, excluding
catastrophe and storm losses, increased to approximately $9.7
million, or $0.47 per share after tax, compared to $5.8 million, or
$0.29 per share after tax, in the third quarter of 2013. The
increase in large losses is primarily attributed to liability
losses in the commercial auto line of business and fire-related
losses in the commercial property line of business. Three
commercial auto/umbrella losses accounted for over two-thirds of
the commercial auto losses during the quarter.
Third quarter catastrophe and storm losses are expected to
approximate $0.84 per share after tax, compared to $0.75 per share
after tax in the third quarter of 2013. The increase is attributed
to the reinsurance segment, which had a significant amount of
additional losses reported on three events that occurred in the
second quarter. One was a severe wind and hail storm in Europe that
had no reported losses until the third quarter. The other two were
severe Midwest storms that had higher levels of losses than
estimated at the end of the second quarter. On a segment basis,
catastrophe and storm losses are expected to total approximately
$10.1 million, or $0.48 per share after tax, in the property and
casualty insurance segment and $7.4 million, or $0.36 per share
after tax, in the reinsurance segment.
Based on actual results for the first nine months of 2014 and
projections for the remainder of the year, management has revised
its 2014 operating income guidance from the previous range of $2.00
to $2.25 per share to a revised range of $1.55 to $1.80 per share.
The revised guidance is based on a projected GAAP combined ratio
for the year of 102.6 percent, and a mid-to-high single digit
increase in investment income. The projected GAAP combined ratio
has a load of 10.8 percentage points for catastrophe and storm
losses, which reflects a decrease of 0.4 percentage points from the
previous load of 11.2 percentage points.
About EMCIEMC 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. Additional information regarding EMC Insurance Group
Inc. may be found at www.emcins.com/ir. 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.
Cautionary Note Regarding 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;
- rating agency actions;
- “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. The Company disclaims
any obligation to update such statements or to announce publicly
the results of any revisions that it may make to any
forward-looking statements to reflect the occurrence of anticipated
or unanticipated events or circumstances after the date of such
statements.
¹The Company prepares its public financial statements in
conformity with accounting principles generally accepted in the
Unites States of America (GAAP). Operating income/loss is a
non-GAAP financial measure, calculated by excluding net realized
investment gains/losses from net income/loss. The Company’s
calculation of operating income/loss may differ from similar
measures used by other companies, so investors should exercise
caution when comparing the Company’s measure of operating
income/loss to the measure of other companies. Management’s
projected operating income guidance is also considered a non-GAAP
financial measure.
Management believes operating income/loss 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. Management also uses non-GAAP financial
measures for goal setting, determining employee and senior
management awards and compensation, and evaluating performance.
EMC Insurance Group Inc.Investors:Steve Walsh,
515-345-2515orMedia:Lisa Hamilton, 515-345-7589
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