EMC Insurance Group Inc. (NASDAQ:EMCI) (the “Company”) today announced that the GAAP combined ratio for the first quarter of 2012 is expected to be approximately 92.5 percent and that operating income
is expected to be in the range of $1.02 to $1.06 per share.
“Both our property and casualty insurance segment and our reinsurance segment experienced strong operating results during the first quarter,” stated Bruce G. Kelley, President and Chief Executive Officer. “The primary drivers of the strong first quarter results are an increase in premium income, which is expected to approximate 14.0 percent, and a significant increase in favorable reserve development. A number of factors contributed to the increase in premium income. In the property and casualty insurance segment, the majority of the increase is attributed to rate level increases, growth in insured exposures and an increase in retained policies. In the reinsurance segment, the increase is attributed to new marine business, as well as rate level increases.”
Favorable development on prior years’ reserves is expected to total approximately $0.82 per share after taxes in the first quarter, compared to $0.20 per share after taxes in the first quarter of 2011. Both the property and casualty insurance segment and the reinsurance segment experienced a significant amount of favorable reserve development in the first quarter.
First quarter catastrophe losses are expected to total approximately $0.49 per share after tax, compared to $0.47 per share after tax in the first quarter of 2011. Catastrophe losses were down in the reinsurance segment, but were up in the property and casualty insurance segment.
Management’s 2012 operating income guidance is currently a range of $1.30 to $1.55 per share, and is based on a projected GAAP combined ratio of 104.9 percent for the year. Despite the strong first quarter operating results, management is not revising its 2012 operating earnings guidance at this time because operating results in the second and third quarters can be extremely volatile depending on the frequency and severity of Midwest storms, and the potential for hurricane losses.