EMC Insurance Group Inc. (EMCI) reported fourth-quarter operating net earnings of 95 cents a share, down 4% year over year. However, the number exceeded the Zacks Consensus Estimate of 87 cents a share by 9.2%.
We believe the better-than-expected performance came on the back of improved results at Reinsurance and Property and Casualty Insurance segments.
Including net realized investment gains of 25 cents a share, net income of EMC Insurance came in at $1.20 per share, up 18.8% year over year.
Operational Update
Revenues of EMC Insurance totaled approximately $146.7 million during the quarter, increasing 14.3% year over year. The increase was mainly attributable to higher premiums earned across both the Reinsurance (up 38.7% year over year) and Property and Casualty Insurance (up 9.5% year over year) segments. The top line result also surpassed the Zacks Consensus Estimate of $144 million.
Meanwhile total losses and expenses of EMC Insurance grossed $129 million during the quarter, up 17% year over year due to higher losses and settlement expenses, underwriting expenses and amortization of deferred policy acquisition costs.
Higher loss and settlement expense ratio led to 120 basis points deterioration in the combined ratio during the quarter that stood at 94.6%.
Full-Year 2013 Highlights
EMC Insurance reported net operating income of $2.88 per share for 2013, beating the Zacks Consensus Estimate of $2.80 per share by 2.9% and up 13.4% year over year. The upside came on the back of strong revenue growth.
Net income of $3.33 per share was also up 12.9% year over year.
Total revenue of $559.4 million increased 11% year over year in 2013 driven by significantly higher premiums earned.
Financial Update
As on Dec 31, 2013, EMC Insurance’s total investment portfolio improved to $1.3 billion versus $1.2 billion at the end of the third quarter. However, total cash stood at $0.2 million compared with $0.6 million at the end of the third quarter. Total shareholder equity stood at $455.2 million at the end of 2013, up from nearly $408 million as of Sep 30, 2013.
Guidance
Based on projected combined ratio of 96.8% and projected investment income consistent with 2013 numbers, EMC Insurance expects 2014 operating net earnings to range between $3.00 and $3.25 per share, up from 2013 levels. Growth across Reinsurance and Property and Casualty Insurance segments is expected to drive results.
Zacks Rank
EMC Insurance presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the property and casualty insurance industry include, AmTrust Financial Services, Inc. (AFSI), Greenlight Capital Re, Ltd. (GLRE) and Navigators Group Inc. (NAVG), all with a Zacks Rank #1 (Strong Buy).
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