EMC Three Hurricane Loss Is $6.9 Million

EMC Three Hurricane Loss Is $6.9 Million

NU Online News Service, Sept. 27, 3:22 p.m. EDT?EMC Insurance Group Inc. said its losses from three of the four hurricanes that have hit Florida this year will total $6.9 million.[@@]

The company also said a notice from A.M. Best Co. of Oldwick, N.J., led the company to reduce its public stock offering in order to sustain an ownership percentage that will allow it to keep its group affiliation rating from the firm.

The Des Moines, Iowa-based insurer said losses from Hurricanes Charley, Frances and Ivan are estimated to total approximately $6.9 million for losses in the Southern U.S. The figure involves the carriers' reinsurance segment from the three storms, which is capped at $1.5 million for each hurricane, totaling $4.5 million.

Losses in the property-casualty insurance segment, the majority of which are associated with damages from Ivan in the Gulf states, are expected to be approximately $2.4 million.

The company said the losses would reduce third-quarter earnings by approximately $4.5 million, or 39 cents a share.

The carrier said it cannot estimate losses associated with Hurricane Jeanne at this time, but EMC pointed out that the eye of Jeanne struck in the same location as Frances, which generated an estimated $1.5 million in losses for the reinsurance segment.

The company also announced Employers Mutual Casualty Company is reducing the number of stock shares it planned to sell from 2.4 million to 1.8 million. It is also reducing the number of shares it planned to sell to underwriters to cover overallotments from 660,000 shares to 570,000.

The move was made in response to a notification from Oldwick, N.J.-based insurance rating agency A.M. Best Company regarding the financial stability rating currently assigned to the participants of the EMC Insurance Companies pooling agreement.

EMC said that Best informed the carrier that the insurance subsidiaries of EMC Insurance Group Inc. that participate in the pooling agreement would no longer qualify for a pool or group affiliation rating if Employers Mutual's ownership of the company fell below 50.1 percent. The stock deal would have put ownership below 50 percent, EMC said.

Best's standards require the controlling company to maintain more than 50 percent stock control and voting control of the boards of directors of each of the pool members in order for the pool members to receive the same ratings in the pool as EMC.

EMC said this position was not communicated to it by Best until after it filed its registration statement, and that continuance of the rating was important to the pool. In light of the Best advisory, EMC reduced its stock offer.