The Company experienced $8,329,000 ($0.42 per share after tax) of favorable development on prior years’ reserves during the third quarter of 2012, compared to $8,612,000 ($0.43 per share after tax) in the third quarter of 2011. For the nine months ended September 30, 2012, favorable development totaled $25,991,000 ($1.31 per share after tax), compared to $21,709,000 ($1.09 per share after tax) in 2011. As in prior periods, development on closed claims is the main driver of the favorable development.
Large losses (which the Company defines as losses greater than $500,000 for the EMC Insurance Companies’ pool, excluding catastrophe losses) remained constant at $4,665,000 ($0.24 per share after tax) in the third quarter of 2012 compared to $4,664,000 ($0.24 per share after tax) in the third quarter of 2011. For the nine months ended September 30, 2012, large losses increased to $17,103,000 ($0.86 per share after tax) from $12,844,000 ($0.65 per share after tax) in 2011.
Investment income decreased 3.2 percent to $10,969,000 in the third quarter of 2012 from $11,331,000 in the third quarter of 2011. For the nine months ended September 30, 2012, investment income decreased 4.6 percent to $33,274,000 from $34,883,000 in 2011. The declines in investment income are attributed to a persistent decline in the average coupon rate on fixed maturity securities during the past several years.
Net realized investment losses totaled $115,000 ($0.00 per share) for the third quarter of 2012 compared to net realized investment losses of $2,289,000 ($0.18 per share) in 2011. For the nine-month period ended September 30, 2012, net realized investment gains totaled $4,942,000 ($0.39 per share), compared to $4,184,000 ($0.32 per share) in 2011.During the third quarter of 2012, the Company recognized $23,000 ($0.00 per share after tax) of “other-than-temporary” investment impairment losses, compared to $4,912,000 ($0.25 per share after tax) in the third quarter of 2011. For the first nine months of 2012, “other-than-temporary” investment impairment losses totaled $149,000 ($0.01 per share after tax), compared to $5,828,000 ($0.29 per share after tax) in 2011. These amounts are included in the net realized investment gains/losses disclosed above.
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