Effective January 1, 2012, the Company will adopt new accounting guidance that clarifies which costs associated with the acquisition of insurance contracts should be capitalized and deferred for recognition during the coverage period. Adoption of this guidance will have an impact on the consolidated financial position and operating results of the Company since certain costs associated with contract acquisition that are currently deferred do not meet the criteria for deferral under this new guidance. The Company is adopting this guidance retrospectively, which will result in a decline in consolidated stockholders’ equity at December 31, 2011 of approximately $6.4 million, net of tax, and a corresponding decline in book value of approximately $0.50 per share. If this guidance had been in effect during 2011, operating results would have been reduced by approximately $640,000, net of tax ($0.05 per share).
Management is projecting that 2012 operating income will be within a range of $1.30 to $1.55 per share. This guidance is based on a projected GAAP combined ratio of 104.9 percent for the year.
As previously disclosed, on November 3, 2011 the Company’s board of directors authorized a new $15 million stock repurchase program. This program became effective immediately and does not have an expiration date. The timing and terms of the purchases are determined by management based on market conditions and are conducted in accordance with the applicable rules of the Securities and Exchange Commission. Common stock repurchased under this new program will be retired by the Company. No shares were repurchased under this new program during the fourth quarter.
The Company’s parent organization, Employers Mutual Casualty Company, currently has a stock purchase program in place, with about $4.5 million of its $15 million authorization remaining. This program has been dormant and will remain so while the Company’s new repurchase program is active.