EMC Reports Q2 Results

Des Moines, Iowa-based carrier EMC Insurance Group Inc. operating income of 9 cents per share for the second quarter ended June 30, 2003 compared to operating income of 45 cents per share for the second quarter of 2002. Operating income for the six months ended June 30, 2003 was 76 cents per share, which equaled the operating income of 76 cents per share reported for the first six months of 2002.

Net income, including realized investment gains/losses, was $1,430,000 (12 cents per share) for the second quarter of 2003 compared to net income of $2,945,000 (26 cents per share) for the second quarter of 2002. Net income for the six-month period ended June 30, 2003 totaled $7,876,000 (69 cents per share) compared to net income of $6,635,000 (58 cents per share) for the same period in 2002.

Results for the second quarter of 2003 were negatively impacted by a large amount of storm losses and adverse development on prior years’ reserves. Storm losses for the first six months of 2003 are comparable in amount to those experienced during the storm-plagued first six months of 2001; however, the impact of these losses was not as severe because premium rates are much more adequate now than they were in 2001.

The adverse development on prior years’ reserves is primarily related to a strengthening of loss reserves in the workers’ compensation line of business and a general strengthening of settlement expense reserves. These reserve increases were implemented in response to recently completed actuarial projections.

Premiums earned increased 11.8 percent to $81,978,000 for the three months ended June 30, 2003 from $73,349,000 for the same period in 2002. For the six-month period ended June 30, 2003, premiums earned increased 14.5 percent to $162,360,000 from $141,858,000 for the same period in 2002. These increases are primarily attributed to rate increases implemented during the last two years in the property and casualty insurance business and growth and improved pricing in the assumed reinsurance business. The Company continued to implement rate increases in the property and casualty insurance business during the first six months of 2003 and additional rate increases are anticipated for the remainder of 2003. These rate increases will be targeted to specific territories and lines of business and generally will be smaller than the rate increases implemented during the past several months.

Catastrophe and storm losses amounted to $10,342,000 ($0.59 per share after tax) in the second quarter of 2003 compared to $3,937,000 ($0.22 per share after tax) in the second quarter of 2002. For the first six months of 2003, catastrophe and storm losses totaled $11,428,000 ($0.65 per share after tax) compared to $4,819,000 ($0.28 per share after tax) for the same period in 2002.

The Company’s GAAP combined ratio was 107.3 percent in the second quarter of 2003 compared to 101.5 percent in the second quarter of 2002. For the first six months of 2003, the GAAP combined ratio was 101.1 percent compared to 102.6 percent for the first six months of 2002.

Net book value of the Company’s stock as of June 30, 2003 was $14.93 per share, an increase of 7.9 percent from $13.84 per share at December 31, 2002.

Employers Mutual Casualty Company has advised the Company that it intends to reinvest 25 percent of its dividends in additional shares of common stock through the Company’s dividend reinvestment plan beginning in the third quarter of 2003. Employers Mutual reinvested 75 percent of its dividends in the second quarter of 2003 and 50 percent of its dividends in the first quarter of 2003.

EMC Insurance Group Inc., the publicly-held insurance holding company of EMC Insurance Companies, owns subsidiaries with operations in property and casualty insurance and reinsurance. EMC Insurance Companies is one of the largest property and casualty entities in Iowa and among the top 60 insurance entities nationwide. For more information, visit our website www.emcinsurance.com.