EMCI's Q3 Earnings In Line, Guides Up

Zacks

EMC Insurance Group Inc.’s (EMCI) third-quarter 2013 operating earnings per share of 50 cents was at par with the Zacks Consensus Estimate but lagged the prior-year quarter’s earnings of 65 cents. Consequently, operating net income plunged 22.6% year over year to $6.5 million.

Including extraordinary items, reported income stood at $7.2 million or 55 cents per share, down from $8.3 million or 65 cents a share. Realized investment gains escalated 150% to $719.5 million.

Total revenues amounted to $143.1 million, up 7.8% from $132.7 million in the prior-year quarter. The uptick was driven by earned premiums that rose 9% year over year to $132.4 million. However, net investment income dipped 3.6% to $10.5 million.

Meanwhile, loss and settlement expenses scaled up 11.2% year over year to $88.2 million. Additionally, underwriting expenses rose 9.5% to $17.3 million. As a result, total expenses increased 10.4% year over year to $134.5 million. Even combined ratio deteriorated to 100.8% from 99.3% in the year-ago quarter, primarily due to higher expense ratios.

Financial Update

As on Sep 30, 2013, EMC Insurance’s total investment portfolio improved to $1.22 billion versus $1.19 billion at 2012-end. Moreover, total cash stood at $600.9 million compared with $330.4 million at the end of 2012. Total shareholder equity stood at $408.0 million at the end of Sep 2013, up from $401.2 million at the end of 2012.

EMC Insurance exited the reported quarter with book value per share of $31.03, up 1.9% from $30.46 at the end of Sep 2013. Excluding accumulated other comprehensive income, book value increased 5.3% to $28.83 per share from 2012-end.

Guidance

Management revised its 2013 operating earnings guidance upward to $2.60−2.85 per share from the prior range of $2.40−2.65 per share. GAAP combined ratio is projected at around 98.4%, while investment income is estimated to decline by mid-single-digit in 2013.

Others

Along with EMC Insurance, other strong performers in the insurance sector include Amerisafe Inc. (AMSF), Hilltop Holdings Inc. (HTH) and Navigators Group Inc. (NAVG). All the four stocks carry a Zacks Rank #2 (Buy).

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