EMC’s 4Q Net Income Dives 61%

NU Online News Service, Feb. 25, 9:50 a.m. EST

Des Moines, Iowa-based insurer EMC Insurance Group Inc. reported fourth-quarter net income dropped 61 percent from the prior year, but excluding the investment gain from the sale of stock investment in 2009 kept earnings virtually flat, the company said.

EMC reported net income for the fourth quarter dropped $17 million to $11 million. Earnings per share fell from $2.10 a share to 83 cents. Revenues increased 3 percent, or close to $4 million, to $115 million. The company's combined ratio rose 4.9 points to 99.6.

For the year, net income was off 31 percent, or $14 million to more than $31 million. Earnings per share dropped from $3.44 a share to $2.40. Revenues increased by less than 2 percent, or $7 million, to $439 million.

Also, the combined ratio on the year rose 2.1 points to 102.3.

The company noted that net income for 2009 included the $15 million realized investment gain from the sale of stock in Verisk Analytics Inc.

“Excluding this one-time transaction, net income for 2010 was comparable to 2009,” Bruce G. Kelley, president and chief executive officer, said in a statement.

During a conference call with financial analysts, EMC Chief Financial Officer Mark Reese said that considering the competitive property and casualty insurance market, increased losses and the economic downturn, “we had a successful year.”

He said that while rates declined in 2010, the company's own experience was “more favorable” than its competitors. In 2011, rates are expected to “increase moderately and personal lines will recover faster than commercial lines.”

The company experienced catastrophe and storm losses of more than $3 million in the fourth quarter of 2010 compared to $520,000 during the same period in 2009. For the year, catastrophe and storm losses amounted to more than $42 million compared to $31 million for the prior year.

Mr. Reese said the company's experience with storm loss is that storms are not trending up. Instead, they are hitting more populated areas, causing greater losses. While the catastrophe and storm losses were significantly higher in 2010 compared to 2009, 2010 losses were comparable to 2008, he said.