EMC Insurance Group Inc. Reports 2012 Second Quarter And Six Months Results

EMC Insurance Group Inc. (Nasdaq:EMCI):

Second Quarter Ended June 30, 2012Operating Loss Per Share – $0.14Net Loss Per Share – $0.20Net Realized Investment Losses Per Share – $0.06Catastrophe Losses Per Share – $1.25Large Losses Per Share – $0.31GAAP Combined Ratio – 113.9 percent

Six Months Ended June 30, 2012Operating Income Per Share – $0.90Net Income Per Share – $1.29Net Realized Investment Gains Per Share – $0.39Catastrophe Losses Per Share – $1.74Large Losses Per Share – $0.63GAAP Combined Ratio – 103.2 percent

Certain amounts previously reported in 2011 have been adjusted in conjunction with the Company’s retrospective adoption of new accounting guidance for the calculation of deferred policy acquisition costs that became effective January 1, 2012.

EMC Insurance Group Inc. (Nasdaq:EMCI) (the “Company”) today reported an operating loss of $0.14 per share for the second quarter ended June 30, 2012, compared to an operating loss of $1.08 per share for the second quarter of 2011 1. For the six months ended June 30, 2012, the Company reported operating income of $0.90 per share, compared to an operating loss of $1.05 per share for the same period in 2011.

Net loss, including realized investment gains and losses, totaled $2,576,000 ($0.20 per share) for the second quarter of 2012, compared to a net loss of $12,902,000 ($1.00 per share) for the second quarter of 2011. For the six months ended June 30, 2012, the Company reported net income of $16,647,000 ($1.29 per share), compared to a net loss of $7,162,000 ($0.55 per share) for the same period in 2011.

“We have expended a great deal of time and resources into implementing much needed rate level increases in the commercial lines of business during the first six months of the year, and those efforts have been successful. Unfortunately, the positive impact those rate increases had on second quarter operating results was overshadowed by a high level of catastrophe losses and a decline in the amount of favorable development experienced on prior years’ reserves,” stated Bruce G. Kelley, President and Chief Executive Officer. “We continue to believe that the persistent level of above-average catastrophe losses is an aberration attributed to an active weather cycle, and does not reflect a permanent change in weather patterns. Future operating results should benefit from the rate level increases we are implementing now.”

Premiums earned increased 9.3 percent to $110,270,000 for the second quarter of 2012, from $100,932,000 for the second quarter of 2011. The property and casualty insurance segment reported a 12.0 percent increase in premiums earned during the quarter, while the reinsurance segment reported a 0.5 percent decline. For the first six months of 2012, premiums earned increased 11.6 percent.

The increase in premium income in the property and casualty insurance segment is the result of several factors, including rate level increases in all lines of business, growth in insured exposures, and strong retention of policies. The decline in the reinsurance segment is attributed to a negative “earned but not reported” (EBNR) premium adjustment recorded during the second quarter on a new offshore energy and liability proportional account that Employers Mutual began participating in effective January 1. During the first quarter, the reinsurance segment recognized $3,975,000 of EBNR premiums on this account. However, based on more refined actuarial projections, and the fact that the 2012 earnings stream on this account is somewhat back-loaded because it is a new account and the majority of the underlying policies are expected to have effective dates in the months of June and July, a total of $990,000 of EBNR premiums was recognized on this account for the six months ended June 30. Accordingly, premium income for the second quarter reflects $2,985,000 of negative EBNR premiums associated with this account. Corresponding decreases in “incurred but not reported” reserves, commission expense reserves and the cost of the excess of loss reinsurance protection were also recorded, resulting in an after-tax impact on second quarter results of less than $100,000. Premium income on this account is currently projected to approximate $8,000,000 for calendar year 2012.

Catastrophe losses totaled $24,847,000 ($1.25 per share after tax) in the second quarter of 2012, compared to $41,065,000 ($2.06 per share after tax) in the second quarter of 2011. For the first six months of 2012, catastrophe losses totaled $34,550,000 ($1.74 per share after taxes), compared to $50,469,000 ($2.53 per share after tax) in 2011. On a segment basis, catastrophe losses amounted to $25,327,000 in the property and casualty insurance segment and $9,223,000 in the reinsurance segment during the first six months of 2012.

“For the Company, the second quarter of any given year has the potential for significant catastrophe losses due to the changing of the seasons. This is especially true in the Midwest, where we conduct the majority of our business, because the change in seasons is often the catalyst for wind and hail storms, and tornados,” continued Kelley. “Although catastrophe losses in the second quarter of 2012 were significantly less than the unprecedented amount experienced in the second quarter of 2011, they were substantially higher than the long-term average. During the second quarter of 2012, catastrophe losses accounted for 22.5 percentage points of the combined ratio. Our most recent 10-year average for the second quarter, which includes the record catastrophe losses experienced during the second quarter of 2011, is 16.6 percentage points of the combined ratio.”

The Company experienced $1,399,000 ($0.07 per share after tax) of favorable development on prior years’ reserves during the second quarter of 2012, compared to $9,190,000 ($0.46 per share after tax) in the second quarter of 2011. For the first six months of 2012, favorable development totaled $17,662,000 ($0.89 per share after tax), compared to $13,097,000 ($0.66 per share after tax) in 2011. Development amounts can vary significantly from quarter-to-quarter and year-to-year depending on a number of factors, including the number of claims settled and the settlement terms, and should therefore not be considered a reliable factor in assessing the adequacy of the Company’s carried reserves. The most recent actuarial analysis of the Company’s carried reserves indicates a level of adequacy consistent with other recent evaluations.

Large losses (which the Company defines as losses greater than $500,000 for the EMC Insurance Companies’ pool, excluding catastrophe losses) increased to $6,114,000 ($0.31 per share after tax) in the second quarter of 2012 from $4,144,000 ($0.21 per share after tax) in the second quarter of 2011. For the first six months of 2012, large losses increased to $12,439,000 ($0.63 per share after tax) from $8,181,000 ($0.41 per share after tax) in 2011.

Investment income decreased 2.8 percent to $11,149,000 in the second quarter of 2012 from $11,473,000 in the second quarter of 2011. For the first six months of 2012, investment income decreased 5.3 percent to $22,305,000 from $23,552,000 in 2011.

“Investment income continues to decline as a result of the low interest rate environment that has persisted for the past several years,” stated Kelley. “We are actively pursuing ways to minimize the decline in investment income without increasing overall risk, such as the implementation of our new equity strategy, which emphasizes dividend income. Those efforts have been successful, and we are currently projecting that the year-to-year decline in investment income will be less than two percent by the end of the year.”

Net realized investment losses totaled $740,000 ($0.06 per share) for the second quarter of 2012, compared to net realized investment gains of $1,105,000 ($0.09 per share) in 2011. For the first six months of 2012, net realized investment gains totaled $5,057,000 ($0.39 per share), compared to $6,473,000 ($0.50 per share) in 2011.

During the second quarter of 2012, the Company recognized $126,000 ($0.01 per share after tax) of “other-than-temporary” investment impairment losses, compared to $670,000 ($0.03 per share after tax) in the second quarter of 2011. For the first six months of 2012, “other-than-temporary” investment impairment losses totaled $126,000 ($0.01 per share after tax) compared to $916,000 ($0.05 per share after tax) in 2011. These amounts are included in the net realized investment gains/losses disclosed above. The “other-than-temporary” investment impairment losses recognized during the second quarter of 2012 were associated with two equity securities.

The Company’s GAAP combined ratio was 113.9 percent in the second quarter of 2012, compared to 133.5 percent in the second quarter of 2011. For the first six months of 2012, the Company’s GAAP combined ratio was 103.2 percent compared to 123.4 percent in 2011.

At June 30, 2012, consolidated assets totaled $1.2 billion, including $1.1 billion in the investment portfolio, and stockholders’ equity totaled $374.7 million, an increase of 6.4 percent from December 31, 2011. Net book value of the Company’s stock increased to $29.08 per share from $27.37 per share at December 31, 2011. Book value excluding accumulated other comprehensive income increased to $26.14 per share from $25.25 per share at December 31, 2011.

Based on actual results for the first six months of 2012 and management’s expectations for the remainder of the year, management is reaffirming its 2012 operating income guidance in the range of $1.30 to $1.55 per share. This range 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 first six months of 2012.

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.

The Company will hold an earnings teleconference call at 11:00 a.m. eastern daylight saving time on August 7, 2012 to allow securities analysts, stockholders and other interested parties the opportunity to hear management discuss the Company’s results for the quarter, as well as its expectations for the remainder of the year. Dial-in information for the call is toll-free 1-877-407-9205 (International: 1-201-689-8054). The event will be archived and available for digital replay through November 5, 2012. The replay access information is toll-free 1-877-660-6853 (International: 1-201-612-7415); passcodes required for playback: account number 286 and conference ID number 397352.

Members of the news media, investors and the general public are invited to access a live webcast of the conference call via the Company’s investor relations page at www.emcins.com/ir. The webcast will be archived and available for replay until November 5, 2012. A transcript of the teleconference will also be available on the Company’s website shortly after the completion of the teleconference.

ABOUT EMCI: EMC 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. 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. Additional information regarding EMC Insurance Companies may be found at www.emcins.com.

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.

¹The Company uses a non-GAAP financial measure called “operating income (loss)” that management believes 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). Therefore, the Company has provided the following reconciliation of the non-GAAP financial measure of operating income (loss) to 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.

Reconciliation of operating income (loss) to net income (loss):
       
Three Months Ended June 30, Six Months Ended June 30,
2012     2011* 2012     2011*
 
Operating income (loss) $ (1,836,552 ) $ (14,007,169 ) $ 11,590,269 $ (13,635,158 )
Net realized investment gains (losses)   (739,919 )   1,105,158     5,056,995   6,472,985  
Net income (loss) $ (2,576,471 ) $ (12,902,011 ) $ 16,647,264 $ (7,162,173 )

 

* Prior year amounts restated, where applicable, for new accounting guidance regarding deferred policy acquisition costs that became effective January 1, 2012.
 
 
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
               
Property and
Casualty Parent
Quarter ended June 30, 2012     Insurance     Reinsurance     Company     Consolidated

Revenues:
Premiums earned (1) $ 87,825,285 $ 22,445,175 $ - $ 110,270,460
Investment income, net 8,139,202 3,011,279 (1,786 ) 11,148,695
Other income   222,751     -     -     222,751  
  96,187,238     25,456,454     (1,786 )   121,641,906  

Losses and expenses:
Losses and settlement expenses (1) 70,620,384 17,779,567 - 88,399,951
Dividends to policyholders 2,260,231 - - 2,260,231
Amortization of deferred policy acquisition costs (1) 16,186,570 4,444,441 - 20,631,011
Other underwriting expenses 14,149,581 180,858 - 14,330,439
Interest expense 225,000 - - 225,000
Other expenses   178,276     (392,315 )   382,781     168,742  
  103,620,042     22,012,551     382,781     126,015,374  
Operating income (loss) before income taxes   (7,432,804 )   3,443,903     (384,567 )   (4,373,468 )
Realized investment losses   (752,888 )   (385,448 )   -     (1,138,336 )
Income (loss) before income taxes   (8,185,692 )   3,058,455     (384,567 )   (5,511,804 )

Income tax expense (benefit):
Current (2,454,703 ) 671,985 (134,598 ) (1,917,316 )
Deferred   (1,086,160 )   68,143     -     (1,018,017 )
  (3,540,863 )   740,128     (134,598 )   (2,935,333 )
Net income (loss) $ (4,644,829 ) $ 2,318,327   $ (249,969 ) $ (2,576,471 )
Average shares outstanding 12,883,333

Per Share Data:
Net income (loss) per share - basic and diluted $ (0.36 ) $ 0.18 $ (0.02 ) $ (0.20 )
Decrease (increase) in provision for insured events
of prior years (after tax) $ 0.22 $ (0.15 ) $ - $ 0.07
Catastrophe and storm losses (after tax) $ (0.99 ) $ (0.26 ) $ - $ (1.25 )
Dividends per share $ 0.20

Other Information of Interest:
Net written premiums $ 96,510,899 $ 21,806,787 $ - $ 118,317,686
Decrease (increase) in provision for insured events
of prior years $ (4,459,576 ) $ 3,060,700 $ - $ (1,398,876 )
Catastrophe and storm losses $ 19,772,735 $ 5,074,309 $ - $ 24,847,044

GAAP Combined Ratio:
Loss ratio 80.4 % 79.2 % - 80.2 %
Expense ratio   37.1 %   20.6 %   -     33.7 %
  117.5 %   99.8 %   -     113.9 %
 

(1)
   

Effective January 1, 2012, Employers Mutual began participating in a new offshore energy and liability proportional account. During the first quarter of 2012, the reinsurance segment recognized $3,577,500 of earned but not reported (EBNR) premiums on this account, net of the ten percent charge for the cost of the excess of loss reinsurance protection provided by Employers Mutual. However, based on more refined actuarial projections, and the fact that the 2012 earnings stream on this account is somewhat back-loaded because it is a new account and the majority of the underlying policies are expected to have effective dates in the months of June and July, a total of $891,000 of EBNR premiums was recognized on this account for the six months ended June 30, 2012. Accordingly, net premiums earned for the three months ended June 30, 2012 reflects $2,686,500 of negative EBNR premiums associated with this account. Corresponding decreases in losses and settlement expenses ($2,239,000) and amortization of deferred policy acquisition costs ($597,000) were also recorded.
 
 
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
               
Property and
Casualty Parent
Quarter Ended June 30, 2011 (as adjusted)* Insurance     Reinsurance     Company     Consolidated

Revenues:
Premiums earned $ 78,381,208 $ 22,550,321 $ - $ 100,931,529
Investment income, net 8,385,878 3,087,022 208 11,473,108
Other income   236,483     -     -     236,483  
  87,003,569     25,637,343     208     112,641,120  

Losses and expenses:
Losses and settlement expenses 72,619,520 29,151,246 - 101,770,766
Dividends to policyholders (144,931 ) - - (144,931 )
Amortization of deferred policy acquisition costs 14,399,750 4,822,359 - 19,222,109
Other underwriting expenses 13,978,078 (72,542 ) - 13,905,536
Interest expense 225,000 - - 225,000
Other expenses   163,725     520,562     338,760     1,023,047  
  101,241,142     34,421,625     338,760     136,001,527  
Operating loss before income taxes   (14,237,573 )   (8,784,282 )   (338,552 )   (23,360,407 )
Realized investment gains   1,303,670     396,573     -     1,700,243  
Loss before income taxes   (12,933,903 )   (8,387,709 )   (338,552 )   (21,660,164 )

Income tax expense (benefit):
Current (5,704,120 ) (2,732,807 ) (118,493 ) (8,555,420 )
Deferred   325,266     (527,999 )   -     (202,733 )
  (5,378,854 )   (3,260,806 )   (118,493 )   (8,758,153 )
Net loss $ (7,555,049 ) $ (5,126,903 ) $ (220,059 ) $ (12,902,011 )
Average shares outstanding 12,958,292

Per Share Data:
Net loss per share - basic and diluted $ (0.58 ) $ (0.40 ) $ (0.02 ) $ (1.00 )
Decrease in provision for
insured events of prior years (after tax) $ 0.44 $ 0.02 $ - $ 0.46
Catastrophe and storm losses (after tax) $ (1.48 ) $ (0.58 ) $ - $ (2.06 )
Dividends per share $ 0.19

Other Information of Interest:
Net written premiums $ 84,905,926 $ 22,299,695 $ - $ 107,205,621
Decrease in provision for
insured events of prior years $ (8,725,061 ) $ (464,668 ) $ - $ (9,189,729 )
Catastrophe and storm losses $ 29,534,341 $ 11,530,250 $ - $ 41,064,591

GAAP Combined Ratio:
Loss ratio 92.6 % 129.3 % - 100.8 %
Expense ratio   36.1 %   21.0 %   -     32.7 %
  128.7 %   150.3 %   -     133.5 %
 

*Amounts adjusted, where applicable, for new accounting guidance regarding deferrable acquisition costs (effective January 1, 2012).
               
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
 
Property and
Casualty Parent
Six Months Ended June 30, 2012 Insurance     Reinsurance     Company     Consolidated

Revenues:
Premiums earned $ 172,856,675 $ 47,173,541 $ - $ 220,030,216
Investment income, net 16,314,329 5,995,204 (4,056 ) 22,305,477
Other income   461,749     -     -     461,749  
  189,632,753     53,168,745     (4,056 )   242,797,442  

Losses and expenses:
Losses and settlement expenses 122,638,637 31,001,603 - 153,640,240
Dividends to policyholders 3,911,756 - - 3,911,756
Amortization of deferred policy acquisition costs 30,806,505 9,038,884 - 39,845,389
Other underwriting expenses 28,991,236 597,072 - 29,588,308
Interest expense 450,000 - - 450,000
Other expenses   397,440     (372,550 )   730,369     755,259  
  187,195,574     40,265,009     730,369     228,190,952  
Operating income (loss) before income taxes   2,437,179     12,903,736     (734,425 )   14,606,490  
Realized investment gains   7,151,901     628,092     -     7,779,993  
Income (loss) before income taxes   9,589,080     13,531,828     (734,425 )   22,386,483  

Income tax expense (benefit):
Current 2,858,800 3,095,734 (257,048 ) 5,697,486
Deferred   (948,143 )   989,876     -     41,733  
  1,910,657     4,085,610     (257,048 )   5,739,219  
Net Income (loss) $ 7,678,423   $ 9,446,218   $ (477,377 ) $ 16,647,264  
Average shares outstanding 12,881,177

Per Share Data:
Net income (loss) per share - basic and diluted $ 0.60 $ 0.73 $ (0.04 ) $ 1.29
Decrease in provision for insured
events of prior years (after tax) $ 0.75 $ 0.14 $ - $ 0.89
Catastrophe and storm losses (after tax) $ (1.27 ) $ (0.47 ) $ - $ (1.74 )
Dividends per share $ 0.40
Book value per share $ 29.08
Effective tax rate 25.6 %
Annualized net income as a percent of beg. SH equity 9.5 %

Other Information of Interest:
Net written premiums $ 182,405,995 $ 43,883,450 $ - $ 226,289,445
Decrease in provision for
insured events of prior years $ (14,964,153 ) $ (2,697,496 ) $ - $ (17,661,649 )
Catastrophe and storm losses $ 25,327,020 $ 9,223,213 $ - $ 34,550,233

GAAP Combined Ratio:
Loss ratio 70.9 % 65.7 % - 69.8 %
Expense ratio   36.9 %   20.4 %   -     33.4 %
  107.8 %   86.1 %   -     103.2 %
 
       
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
       
Property and
Casualty Parent
Six Months Ended June 30, 2011 (as adjusted)* Insurance     Reinsurance     Company     Consolidated

Revenues:
Premiums earned $ 155,692,500 $ 41,525,843 $ - $ 197,218,343
Investment income, net 17,283,528 6,267,569 606 23,551,703
Other income   440,313     -     -     440,313  
  173,416,341     47,793,412     606     221,210,359  

Losses and expenses:
Losses and settlement expenses 123,787,208 51,353,159 - 175,140,367
Dividends to policyholders 2,368,038 - - 2,368,038
Amortization of deferred policy acquisition costs 27,826,283 8,844,908 - 36,671,191
Other underwriting expenses 28,602,845 488,042 - 29,090,887
Interest expense 450,000 - - 450,000

Other expenses
  326,441     941,848     687,136     1,955,425  
  183,360,815     61,627,957     687,136     245,675,908  
Operating loss before income taxes   (9,944,474 )   (13,834,545 )   (686,530 )   (24,465,549 )
Realized investment gains   7,657,024     2,301,415     -     9,958,439  
Loss before income taxes   (2,287,450 )   (11,533,130 )   (686,530 )   (14,507,110 )

Income tax expense (benefit):
Current (2,872,418 ) (3,825,642 ) (240,285 ) (6,938,345 )
Deferred   460,945     (867,537 )   -     (406,592 )
  (2,411,473 )   (4,693,179 )   (240,285 )   (7,344,937 )
Net income (loss) $ 124,023   $ (6,839,951 ) $ (446,245 ) $ (7,162,173 )
Average shares outstanding 12,946,923

Per Share Data:
Net income (loss) per share - basic and diluted $ 0.01 $ (0.53 ) $ (0.03 ) $ (0.55 )
Decrease (increase) in provision for insured
events of prior years (after tax) $ 0.67 $ (0.01 ) $ - $ 0.66
Catastrophe and storm losses (after tax) $ (1.65 ) $ (0.88 ) $ - $ (2.53 )
Dividends per share $ 0.38
Book value per share $ 27.62
Effective tax rate 50.6 %
Annualized net loss as a percent of beg. SH equity (3.9 )%

Other Information of Interest:
Net written premiums $ 161,534,226 $ 42,456,561 $ - $ 203,990,787
Increase (decrease) in provision for
insured events of prior years $ (13,407,086 ) $ 310,068 $ - $ (13,097,018 )
Catastrophe and storm losses $ 32,957,679 $ 17,511,594 $ - $ 50,469,273

GAAP Combined Ratio:
Loss ratio 79.5 % 123.7 % - 88.8 %
Expense ratio   37.8 %   22.4 %   -     34.6 %
  117.3 %   146.1 %   -     123.4 %
 

*Amounts adjusted, where applicable, for new accounting guidance regarding deferrable acquisition costs (effective January 1, 2012).
       
CONSOLIDATED BALANCE SHEETS - UNAUDITED
June 30, December 31,
2012 2011*
ASSETS
Investments:
Fixed maturities:
Securities available-for-sale, at fair value
(amortized cost $876,967,172 and $899,939,616) $ 946,645,164 $ 958,203,576
Equity securities available-for-sale, at fair value
(cost $109,210,769 and $90,866,131) 133,132,956 111,300,053
Other long-term investments 11,279 14,527
Short-term investments   66,294,976     42,628,926  
Total investments 1,146,084,375 1,112,147,082
 
Cash 286,443 255,042
Reinsurance receivables due from affiliate 37,730,986 39,517,108
Prepaid reinsurance premiums due from affiliate 5,855,045 9,378,026
Deferred policy acquisition costs (affiliated $32,070,523
and $30,849,717) 32,084,672 30,849,717
Accrued investment income 10,034,337 10,256,499
Accounts receivable 1,714,663 1,644,782
Income taxes recoverable 7,386,885 9,670,459
Deferred income taxes 985,398 6,710,919
Goodwill 941,586 941,586
Other assets (affiliated $6,141,690 and $2,584,111)   6,328,823     2,659,942  
Total assets $ 1,249,433,213   $ 1,224,031,162  
 
LIABILITIES
Losses and settlement expenses (affiliated $589,605,980
and $588,846,586) $ 594,679,522 $ 593,300,247
Unearned premiums (affiliated $183,599,425 and $180,689,377) 183,670,946 180,689,377
Other policyholders' funds (all affiliated) 5,546,575 5,061,160
Surplus notes payable to affiliate 25,000,000 25,000,000
Amounts due affiliate to settle inter-company transaction balances 7,874,551 21,033,627
Pension and postretirement benefits payable to affiliate 31,823,411 29,671,835
Other liabilities (affiliated $14,944,226 and $16,744,447)   26,096,504     16,934,321  
Total liabilities   874,691,509     871,690,567  
 
STOCKHOLDERS' EQUITY
Common stock, $1 par value, authorized 20,000,000
shares; issued and outstanding, 12,887,333
shares in 2012 and 12,875,591 shares in 2011 12,887,333 12,875,591
Additional paid-in capital 88,650,565 88,310,632
Accumulated other comprehensive income (loss):
Net unrealized gains on investments 60,840,115 51,153,622
Unrecognized pension and postretirement benefit obligations
(all affiliated)   (22,944,002 )   (23,813,112 )
Total accumulated other comprehensive income   37,896,113     27,340,510  
Retained earnings   235,307,693     223,813,862  
Total stockholders' equity   374,741,704     352,340,595  
Total liabilities and stockholders' equity $ 1,249,433,213   $ 1,224,031,162  
 

* Prior year amounts adjusted, where applicable, for new accounting guidance regarding deferrable acquisition costs (effective January 1, 2012).

INVESTMENTSThe Company had total cash and invested assets with a carrying value of $1.1 billion as of June 30, 2012 and December 31, 2011. The following table summarizes the Company's cash and invested assets as of the dates indicated:

   
June 30, 2012
        Percent of    
Amortized Fair Total Carrying
($ in thousands) Cost Value Fair Value Value
Fixed maturity securities available-for-sale $ 876,967 $ 946,645 82.6 % $ 946,645
Equity securities available-for-sale 109,211 133,133 11.6 % 133,133
Cash 286 286 - 286
Short-term investments 66,295 66,295 5.8 % 66,295
Other long-term investments   11   11 -     11
$ 1,052,770 $ 1,146,370 100.0 % $ 1,146,370
 
December 31, 2011
Percent of
Amortized Fair Total Carrying
($ in thousands) Cost Value Fair Value Value
Fixed maturity securities available-for-sale $ 899,940 $ 958,204 86.1 % $ 958,204
Equity securities available-for-sale 90,866 111,300 10.0 % 111,300
Cash 255 255 - 255
Short-term investments 42,629 42,629 3.9 % 42,629
Other long-term investments   14   14 -     14
$ 1,033,704 $ 1,112,402 100.0 % $ 1,112,402
 
                     
NET WRITTEN PREMIUMS
Three Months Ended Six Months Ended
June 30, 2012         June 30, 2012    
Percent of Percent of
Increase/ Increase/
Percent of (Decrease) in Percent of (Decrease) in
Net Written Net Written Net Written Net Written
Premiums         Premiums         Premiums         Premiums    
Property and Casualty Insurance
Commercial Lines:
Automobile 18.5 % 17.6 % 18.2 % 17.4 %
Liability 16.3 % 16.3 % 16.1 % 15.6 %
Property 17.7 % 16.5 % 17.4 % 13.3 %
Workers' Compensation 15.3 % 14.4 % 15.7 % 14.3 %
Other 1.6   %

(4.1

)
% 1.6   % 0.1 %
Total Commercial Lines 69.4   % 15.7 % 69.0   % 14.8 %
 
Personal Lines:
Automobile 6.5 %

(0.3

)
% 6.5 % 0.7 %
Property 5.5 % 7.5 % 5.0 % 5.9 %
Liability 0.2   % 15.9 % 0.1   % 15.1 %
Total Personal Lines 12.2   % 3.2 % 11.6   % 3.0 %
Total Property and Casualty Insurance 81.6   % 13.7 % 80.6   % 12.9 %
 
Reinsurance (1) (2) 18.4   %

(2.2

)
% 19.4   % 5.7 %
Total 100.0   % 10.4 % 100.0   % 11.4 %
 
(1)     Percentages for the six months ended June 30, 2012 include $3,065,279 negative portfolio adjustment related to the January 1, 2012 cancellation of a large pro rata account.
(2) Percent increase for the six months ended June 30, 2012 excludes $920,597 positive portfolio adjustment related to the January 1, 2011 increased participation in the MRB pool.

Copyright Business Wire 2010

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