EMC Insurance Group Inc. Announces an Increase in 2016 Guidance
January 27 2017 - 6:30AM
EMC Insurance Group Inc. (NASDAQ:EMCI) (the “Company”), today
announced that it expects to report net income in the range of
$2.18 to $2.23 per share and non-GAAP operating income1 in the
range of $2.05 to $2.10 per share for the year ended December 31,
2016. The GAAP combined ratio for the year is expected to be
approximately 97.7 percent. These results are significantly better
than the Company’s most recent guidance, which anticipated non-GAAP
operating income1 in the range of $1.55 to $1.75 per share and a
GAAP combined ratio of 99.6 percent.
“We exceeded our expectations for 2016,” stated President and
Chief Executive Officer Bruce G. Kelley. “Our strong fourth quarter
capped an excellent year, especially given the softening rate
environment and increasing competition for quality accounts.”
The increase in guidance is primarily attributed to the property
and casualty insurance segment, which is expected to report a
fourth quarter GAAP combined ratio of approximately 92.2 percent
that is much lower than previously anticipated. This improvement
was primarily driven by favorable development on prior years’
reserves and a low amount of catastrophe and storm losses. The
favorable development on prior years’ reserves primarily reflects
moderate reductions in the ultimate loss ratios for several
accident years in the workers’ compensation line of business and a
reduction in settlement expense reserves. The low amount of
catastrophe and storm losses is attributed to the new semi-annual
aggregate catastrophe excess of loss intercompany reinsurance
program between the property and casualty insurance subsidiaries
and Employers Mutual Casualty Company (Employers Mutual), which
capped losses at $512,000 in the fourth quarter. The reinsurance
segment’s GAAP combined ratio is estimated to be approximately 89.8
percent for the fourth quarter.
About EMCIEMC 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
Stock Market under the symbol EMCI. Additional information
regarding EMC Insurance Group Inc. may be found at
www.emcins.com/ir. EMCI’s parent company is Employers Mutual. EMCI
and Employers Mutual, together with their subsidiary and affiliated
companies, conduct operations under the trade name EMC Insurance
Companies.
Cautionary Note Regarding 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. The Company disclaims
any obligation to update such statements or to announce publicly
the results of any revisions that it may make to any
forward-looking statements to reflect the occurrence of anticipated
or unanticipated events or circumstances after the date of such
statements.
Definition of Non-GAAP Information and Reconciliation to
Comparable GAAP MeasuresThe Company prepares its public
financial statements in conformity with accounting principles
generally accepted in the United States of America (GAAP).
Management uses certain non-GAAP financial measures for goal
setting, determining employee and senior management awards and
compensation, and evaluating performance. One of the primary
non-GAAP financial measures utilized by management for evaluating
the Company’s performance is operating income. Management’s
operating income guidance is also considered a non-GAAP financial
measure.
1Non-GAAP operating income: Non-GAAP operating income is
calculated by excluding net realized investment gains/losses
(defined as realized investment gains/losses after applicable
federal and state income taxes) from net income. While realized
investment gains/losses are integral to the Company’s insurance
operations over the long term, the decision to realize investment
gains or losses in any particular period is subject to changing
market conditions and management’s discretion, and is independent
of the Company’s insurance operations. The Company’s calculation of
non-GAAP operating income may differ from similar measures used by
other companies, so investors should exercise caution when
comparing the Company’s measure of non-GAAP operating income to the
measure used by other companies.
Management believes non-GAAP operating income is useful to
investors because it illustrates the performance of the Company’s
normal, ongoing operations, which is important in understanding and
evaluating the Company’s financial condition and results of
operations. While this measure is consistent with measures utilized
by investors and analysts to evaluate performance, it is not
intended as a substitute for the GAAP financial measure of net
income. Therefore, the Company has provided the following
reconciliation of the expected range of the GAAP financial measure
of net income per share to the expected range of the non-GAAP
financial measure of operating income per share.
|
|
|
|
RECONCILIATION OF EXPECTED RANGE OF NET INCOME PER SHARE TO
EXPECTED RANGE OF |
NON-GAAP
OPERATING INCOME PER SHARE |
|
|
|
|
Year ended |
|
December 31, |
|
Estimated low end of range |
|
Estimated high end of range |
Net income |
$ |
2.18 |
|
$ |
2.23 |
Realized investment
gains |
|
0.19 |
|
|
0.19 |
Income tax expense |
|
0.06 |
|
|
0.06 |
Net
realized investment gains |
|
0.13 |
|
|
0.13 |
Non-GAAP
operating income |
$ |
2.05 |
|
$ |
2.10 |
|
|
|
|
Contacts
Investors:
Steve Walsh, 515-345-2515
steve.t.walsh@emcins.com
Media:
Lisa Hamilton, 515-345-7589
lisa.l.hamilton@emcins.com
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