DES MOINES, Iowa–(BUSINESS WIRE)–EMC Insurance Group Inc. (Nasdaq OMX/GS:EMCI) today reported operating income of $0.71 per share for the fourth quarter ended December 31, 2010, compared to operating income of $0.98 per share for the fourth quarter of 20091. Operating income for the year ended December 31, 2010 was $2.21 per share, compared to $2.55 per share in 2009.
Net income, including realized investment gains and losses, totaled $10,711,000 ($0.83 per share) for the fourth quarter of 2010 compared to $27,549,000 ($2.10 per share) for the fourth quarter of 2009. Net income for the year ended December 31, 2010 was $31,346,000 ($2.40 per share), compared to a net income of $45,371,000 ($3.44 per share) in 2009.
“Net income for 2009 includes $14,608,000 ($1.11 per share) of net realized investment gain resulting from the sale of the Company’s common stock investment in Verisk Analytics, Inc.,” stated Bruce G. Kelley, President and Chief Executive Officer. “Excluding this one-time transaction, net income for 2010 was comparable to 2009.”
“Operating results continue to meet our expectations,” continued Kelley. “Pricing remains competitive in the commercial lines of business, but we continue to see modest pricing improvements in the personal lines of business. Due to the mild 2009 and 2010 hurricane seasons and a recovery in the reinsurance industry’s capital level, premium rate levels in the reinsurance segment were generally flat in 2010,” continued Kelley. “However, premiums earned for the reinsurance segment were up 9.9 percent in 2010 due to the addition of new facility business, as well as new property business in central and eastern Europe.”
Kelley went on to say that, “for the third consecutive year, underwriting results reflect higher than normal storm losses. We have experienced similar periods of increased storm losses in the past and based on our research, do not believe this represents a permanent trend; nonetheless, we are monitoring current weather patterns closely so that our underwriting and pricing decisions reflect the most current information available.”
Premiums earned increased 4.4 percent to $103,062,000 for the fourth quarter of 2010, from $98,726,000 for the fourth quarter of 2009. Premiums earned for the year ended December 31, 2010 increased 1.3 percent to $389,122,000 from $384,011,000 in 2009.
Investment income decreased 3.4 percent to $12,075,000 in the fourth quarter of 2010 from $12,505,000 in the fourth quarter of 2009. Investment income for the year ended December 31, 2010 increased 3.6 percent to $49,489,000 from $47,759,000 in 2009, primarily due to the reinvestment of short-term holdings into Build America Bonds in the fourth quarter of 2009.
The Company experienced $4,562,000 ($0.23 per share after tax) of favorable development on prior years’ reserves during the fourth quarter of 2010, compared to $9,383,000 ($0.47 per share after tax) in the fourth quarter of 2009. For the year ended December 31, 2010, favorable development on prior years’ reserves totaled $50,749,000 ($2.53 per share after tax) compared to $48,622,000 ($2.39 per share after tax) in 2009. Included in the above amounts is $357,000 ($0.02 per share after tax) and $32,000 ($0.00 per share after tax) of favorable development on prior years’ catastrophe and storm loss reserves during the fourth quarter and year ended December 31, 2010. For comparative purposes, favorable development on prior years’ catastrophe and storm loss reserves totaled $507,000 ($0.03 per share after tax) and $3,476,000 ($0.17 per share after tax) for the same periods in 2009.
“Other-than-temporary” investment impairment losses declined to $89,000 in the fourth quarter of 2010 from $381,000 in the fourth quarter of 2009. For the year ended December 31, 2010, “other-than-temporary” investment impairment losses totaled $2,384,000, compared to $10,108,000 in 2009. The 2010 impairments included 23 equity securities and two residential mortgage-backed securities.
Catastrophe and storm losses totaled $3,051,000 ($0.15 per share after tax) in the fourth quarter of 2010 compared to $520,000 ($0.03 per share after tax) in the fourth quarter of 2009. Catastrophe and storm losses for the year ended December 31, 2010 totaled $42,144,000 ($2.10 per share after tax) compared to $31,465,000 ($1.55 per share after tax) in 2009. Catastrophe and storm losses accounted for 10.8 percentage points of the combined ratio for the year ended December 31, 2010, which is significantly higher than the 9-year average of 5.5 percentage points for the period 1999 to 2007, but lower than the record 13.5 percentage points experienced in 2008.
Large losses (which the Company defines as losses greater than $500,000 for the pool), excluding catastrophe and storm losses, increased to $6,005,000 ($0.30 per share after taxes) in the fourth quarter of 2010 from $3,980,000 ($0.20 per share after taxes) in the fourth quarter of 2009. For the year ended December 31, 2010, large losses totaled $19,634,000 ($0.98 per share after taxes), compared to $14,713,000 ($0.72 per share after taxes) in 2009.
The Company’s GAAP combined ratio was 99.6 percent in the fourth quarter of 2010 compared to 94.7 percent in the fourth quarter of 2009. For the year ended December 31, 2010, the Company’s GAAP combined ratio was 102.3 percent compared to 100.2 percent in 2009.
At December 31, 2010, consolidated assets totaled $1.2 billion, including $1.1 billion in the investment portfolio and stockholders’ equity totaled $368.6 million, an increase of 7.7 percent from December 31, 2009. Net book value of the Company’s stock was $28.52 per share, an increase of 9.2 percent from $26.11 per share at December 31, 2009. Book value excluding accumulated other comprehensive income increased to $26.63 per share from $24.89 per share at December 31, 2009.
Management is projecting that 2011 operating income will be within a range of $1.90 to $2.15 per share. This guidance is based on a projected GAAP combined ratio of 103.6 percent for the year.
During the fourth quarter of 2010 the Company repurchased 100 shares of its common stock at a cost of $21.05 per share. For the year, the Company repurchased 244,400 shares of its common stock at an average cost of $21.67 per share. Since the inception of the repurchase program in March, 2008, the Company has repurchased 980,533 shares of the Company’s 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 full earnings release is available here.
Source: BusinessWire