x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
EMC INSURANCE GROUP INC.
|
||
(Exact name of registrant as specified in its charter) |
Iowa
|
42-6234555
|
|
(State or other jurisdiction of incorporation ororganization)
|
(I.R.S. Employer Identification No.)
|
717 Mulberry Street, Des Moines, Iowa
|
50309
|
|
(Address of principal executive office)
|
(Zip Code)
|
(515) 345-2902
|
||
(Registrant’s telephone number, including area code)
|
Large accelerated filer
|
o
|
Accelerated filer
|
x
|
Non accelerated filer
|
o
|
Smaller reporting company
|
o
|
Class
|
Outstanding at April 30, 2010
|
|
Common stock, $1.00 par value
|
13,134,297
|
PAGE
|
|||
3
|
|||
31
|
|||
45
|
|||
46
|
|||
47
|
|||
48
|
|||
49
|
|||
50
|
March 31,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
ASSETS
|
||||||||
Investments:
|
||||||||
Fixed maturities:
|
||||||||
Securities held-to-maturity, at amortized cost (fair value $457,654 and $460,877)
|
$ | 404,578 | $ | 410,005 | ||||
Securities available-for-sale, at fair value (amortized cost $874,763,572 and $858,129,177)
|
909,636,075 | 884,688,114 | ||||||
Fixed maturity securities on loan:
|
||||||||
Securities available-for-sale, at fair value (amortized cost $5,653,350 and $14,065,597)
|
5,661,499 | 14,492,872 | ||||||
Equity securities available-for-sale, at fair value (cost $74,007,221 and $73,114,920)
|
95,974,749 | 90,189,979 | ||||||
Other long-term investments, at cost
|
43,028 | 47,083 | ||||||
Short-term investments, at cost
|
42,591,167 | 55,390,096 | ||||||
Total investments
|
1,054,311,096 | 1,045,218,149 | ||||||
Balances resulting from related party transactions with Employers Mutual:
|
||||||||
Reinsurance receivables
|
29,948,024 | 30,544,558 | ||||||
Prepaid reinsurance premiums
|
6,816,201 | 5,112,386 | ||||||
Deferred policy acquisition costs
|
36,118,550 | 36,650,628 | ||||||
Other assets
|
3,516,510 | 2,058,189 | ||||||
Cash
|
534,292 | 278,534 | ||||||
Accrued investment income
|
12,734,422 | 11,082,132 | ||||||
Deferred policy acquisition costs
|
3,608 | — | ||||||
Accounts receivable
|
2,126,550 | 1,611,740 | ||||||
Deferred income taxes
|
9,958,199 | 15,044,357 | ||||||
Goodwill
|
941,586 | 941,586 | ||||||
Securities lending collateral
|
5,911,111 | 14,941,880 | ||||||
Other assets
|
24,000 | 2,303,654 | ||||||
Total assets
|
$ | 1,162,944,149 | $ | 1,165,787,793 |
March 31,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
LIABILITIES
|
||||||||
Balances resulting from related party transactions with Employers Mutual:
|
||||||||
Losses and settlement expenses
|
$ | 551,539,590 | $ | 553,787,770 | ||||
Unearned premiums
|
159,017,958 | 159,486,096 | ||||||
Other policyholders’ funds
|
8,543,714 | 7,918,665 | ||||||
Surplus notes payable
|
25,000,000 | 25,000,000 | ||||||
Indebtedness to related party
|
17,392,596 | 13,488,724 | ||||||
Employee retirement plans
|
19,316,435 | 18,176,720 | ||||||
Other liabilities
|
11,273,858 | 20,335,197 | ||||||
Losses and settlement expenses
|
2,878,053 | 2,363,807 | ||||||
Unearned premiums
|
16,989 | — | ||||||
Income taxes payable
|
3,142,060 | 5,488,760 | ||||||
Securities lending obligation
|
5,911,111 | 14,941,880 | ||||||
Other liabilities
|
82,468 | 2,382,489 | ||||||
Total liabilities
|
804,114,832 | 823,370,108 | ||||||
STOCKHOLDERS’ EQUITY
|
||||||||
Common stock, $1 par value, authorized 20,000,000 shares; issued and outstanding, 13,133,361 shares in 2010 and 13,114,481 shares in 2009
|
13,133,361 | 13,114,481 | ||||||
Additional paid-in capital
|
93,187,181 | 92,804,282 | ||||||
Accumulated other comprehensive income (loss):
|
||||||||
Net unrealized losses on fixed maturity securities with “other-than-temporary” impairments
|
(16,492 | ) | (104,847 | ) | ||||
Other net unrealized gains
|
36,967,808 | 28,744,673 | ||||||
Employee retirement plans
|
(12,403,208 | ) | (12,587,484 | ) | ||||
Total accumulated other comprehensive income (loss)
|
24,548,108 | 16,052,342 | ||||||
Retained earnings
|
227,960,667 | 220,446,580 | ||||||
Total stockholders’ equity
|
358,829,317 | 342,417,685 | ||||||
Total liabilities and stockholders’ equity
|
$ | 1,162,944,149 | $ | 1,165,787,793 |
Three months ended March 31,
|
||||||||
2010
|
2009
|
|||||||
REVENUES
|
||||||||
Premiums earned:
|
||||||||
Related party transactions
|
$ | 91,455,297 | $ | 92,416,351 | ||||
Other transactions
|
889,769 | 38,197 | ||||||
Total premiums earned
|
92,345,066 | 92,454,548 | ||||||
Investment income, net
|
12,516,987 | 12,277,235 | ||||||
Net realized investment gains (losses), excluding impairment losses on available-for-sale securities
|
877,308 | (234,960 | ) | |||||
Total “other-than-temporary” impairment losses on available-for-sale securities
|
(231,856 | ) | (8,357,350 | ) | ||||
Portion of impairment losses on fixed maturity available-for-sale securities recognized in other comprehensive income (before taxes)
|
(120,539 | ) | — | |||||
Net impairment losses on available-for-sale securities
|
(352,395 | ) | (8,357,350 | ) | ||||
Net realized investment gains (losses)
|
524,913 | (8,592,310 | ) | |||||
Other income
|
206,686 | 152,986 | ||||||
105,593,652 | 96,292,459 | |||||||
LOSSES AND EXPENSES
|
||||||||
Losses and settlement expenses:
|
||||||||
Related party transactions
|
55,433,133 | 53,776,614 | ||||||
Other transactions
|
609,491 | — | ||||||
Total losses and settlement expenses
|
56,042,624 | 53,776,614 | ||||||
Dividends to policyholders
|
2,354,462 | 3,829,606 | ||||||
Amortization of deferred policy acquisition costs:
|
||||||||
Related party transactions
|
21,607,445 | 22,006,861 | ||||||
Other transactions
|
257,670 | 3,845 | ||||||
Total amortization of deferred policy acquisition costs
|
21,865,115 | 22,010,706 | ||||||
Other underwriting expenses
|
10,365,194 | 9,130,283 | ||||||
Interest expense
|
225,000 | 225,000 | ||||||
Other expense:
|
||||||||
Related party transactions
|
278,020 | 393,232 | ||||||
Other transactions
|
(79,817 | ) | — | |||||
Total other expense
|
198,203 | 393,232 | ||||||
91,050,598 | 89,365,441 | |||||||
Income before income tax expense (benefit)
|
14,543,054 | 6,927,018 | ||||||
INCOME TAX EXPENSE (BENEFIT)
|
||||||||
Current
|
4,153,450 | 4,580,982 | ||||||
Deferred
|
511,512 | (3,457,827 | ) | |||||
4,664,962 | 1,123,155 | |||||||
Net income
|
$ | 9,878,092 | $ | 5,803,863 | ||||
Net income per common share | ||||||||
-basic and diluted
|
$ | 0.75 | $ | 0.44 | ||||
Dividend per common share
|
$ | 0.18 | $ | 0.18 | ||||
Average number of common shares outstanding | ||||||||
-basic and diluted
|
13,123,810 | 13,249,735 |
Three months ended March 31,
|
||||||||
2010
|
2009
|
|||||||
Net income
|
$ | 9,878,092 | $ | 5,803,863 | ||||
OTHER COMPREHENSIVE INCOME (LOSS)
|
||||||||
Change in unrealized holding gains (losses) on investment securities, before deferred income tax expense (benefit)
|
13,296,431 | (8,298,064 | ) | |||||
Deferred income tax expense (benefit)
|
4,653,751 | (2,904,323 | ) | |||||
8,642,680 | (5,393,741 | ) | ||||||
Reclassification adjustment for realized investment (gains) losses included in net income, before income tax (expense) benefit
|
(645,452 | ) | 8,592,310 | |||||
Income tax (expense) benefit
|
(225,907 | ) | 3,007,309 | |||||
(419,545 | ) | 5,585,001 | ||||||
Change in unrealized holding gains on fixed maturity securities with “other-than-temporary” impairment, before deferred income tax expense
|
15,391 | — | ||||||
Deferred income tax expense
|
5,387 | — | ||||||
10,004 | — | |||||||
Reclassification adjustment for realized investment losses from fixed maturity securities with “other-than-temporary” impairment included in net income, before income tax benefit
|
120,539 | — | ||||||
Income tax benefit
|
42,188 | — | ||||||
78,351 | — | |||||||
Adjustment associated with Employers Mutual’s retirement benefit plans, before deferred income tax expense:
|
||||||||
Net actuarial loss
|
403,567 | 491,106 | ||||||
Prior service credit
|
(120,064 | ) | (120,048 | ) | ||||
283,503 | 371,058 | |||||||
Deferred income tax expense
|
99,227 | 129,870 | ||||||
184,276 | 241,188 | |||||||
Other comprehensive income
|
8,495,766 | 432,448 | ||||||
Total comprehensive income
|
$ | 18,373,858 | $ | 6,236,311 |
Three months ended March 31,
|
||||||||
2010
|
2009
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net income
|
$ | 9,878,092 | $ | 5,803,863 | ||||
Adjustments to reconcile net income to net cash used in operating activities:
|
||||||||
Balances resulting from related party transactions with Employers Mutual:
|
||||||||
Losses and settlement expenses
|
(2,248,180 | ) | (9,010,852 | ) | ||||
Unearned premiums
|
(468,138 | ) | (3,101,790 | ) | ||||
Other policyholders’ funds
|
625,049 | 2,372,122 | ||||||
Indebtedness to related party
|
3,903,872 | (10,363,738 | ) | |||||
Employee retirement plans
|
1,423,218 | 1,464,853 | ||||||
Reinsurance receivables
|
596,534 | (315,449 | ) | |||||
Prepaid reinsurance premiums
|
(1,703,815 | ) | (375,270 | ) | ||||
Commission payable
|
(5,669,456 | ) | (6,057,634 | ) | ||||
Interest payable
|
(675,000 | ) | (450,925 | ) | ||||
Prepaid assets
|
(1,366,020 | ) | (1,781,688 | ) | ||||
Deferred policy acquisition costs
|
532,078 | 486,052 | ||||||
Stock-based compensation plans
|
67,361 | 144,276 | ||||||
Other, net
|
(2,809,185 | ) | 991,257 | |||||
Accrued investment income
|
(1,652,290 | ) | 1,207,157 | |||||
Accrued income tax:
|
||||||||
Current
|
(2,346,699 | ) | 7,980,971 | |||||
Deferred
|
511,512 | (3,457,827 | ) | |||||
Realized investment (gains) losses
|
(524,913 | ) | 8,592,310 | |||||
Unearned premiums
|
16,989 | — | ||||||
Losses and settlement expenses
|
514,246 | — | ||||||
Accounts receivable
|
(514,810 | ) | (31,816 | ) | ||||
Amortization of premium/discount on fixed maturity securities
|
(203,776 | ) | (54,136 | ) | ||||
Other, net
|
(12,137 | ) | — | |||||
(12,003,560 | ) | (11,762,127 | ) | |||||
Net cash used in operating activities
|
$ | (2,125,468 | ) | $ | (5,958,264 | ) |
Three months ended March 31,
|
||||||||
2010
|
2009
|
|||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Maturities of fixed maturity securities held-to-maturity
|
$ | 5,471 | $ | 38,000 | ||||
Purchases of fixed maturity securities available-for-sale
|
(32,246,159 | ) | (10,851,532 | ) | ||||
Disposals of fixed maturity securities available-for-sale
|
24,022,995 | 47,561,685 | ||||||
Purchases of equity securities available-for-sale
|
(6,700,487 | ) | (15,401,758 | ) | ||||
Disposals of equity securities available-for-sale
|
6,526,009 | 14,732,977 | ||||||
Disposals of other long-term investments
|
4,055 | 4,714 | ||||||
Net sales (purchases) of short-term investments
|
12,798,929 | (27,023,562 | ) | |||||
Net cash provided by investing activities
|
4,410,813 | 9,060,524 | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Balances resulting from related party transactions with Employers Mutual:
|
||||||||
Issuance of common stock through Employers Mutual’s stock option plans
|
334,418 | 47,987 | ||||||
Dividends paid to Employers Mutual
|
(1,412,613 | ) | (1,412,613 | ) | ||||
Repurchase of common stock
|
— | (706,483 | ) | |||||
Dividends paid to public stockholders
|
(951,392 | ) | (969,681 | ) | ||||
Net cash used in financing activities
|
(2,029,587 | ) | (3,040,790 | ) | ||||
NET INCREASE IN CASH
|
255,758 | 61,470 | ||||||
Cash at the beginning of the year
|
278,534 | 182,538 | ||||||
Cash at the end of the quarter
|
$ | 534,292 | $ | 244,008 |
Three months ended March 31, 2010
|
||||||||||||
Property and
|
||||||||||||
casualty
|
||||||||||||
insurance
|
Reinsurance
|
Total
|
||||||||||
Premiums written
|
||||||||||||
Direct
|
$ | 58,737,264 | $ | — | $ | 58,737,264 | ||||||
Assumed from nonaffiliates
|
548,249 | 23,823,795 | 24,372,044 | |||||||||
Assumed from affiliates
|
77,339,454 | — | 77,339,454 | |||||||||
Ceded to nonaffiliates
|
(5,332,061 | ) | (5,827,666 | ) | (11,159,727 | ) | ||||||
Ceded to affiliates
|
(58,737,264 | ) | — | (58,737,264 | ) | |||||||
Net premiums written
|
$ | 72,555,642 | $ | 17,996,129 | $ | 90,551,771 | ||||||
Premiums earned
|
||||||||||||
Direct
|
$ | 58,838,450 | $ | — | $ | 58,838,450 | ||||||
Assumed from nonaffiliates
|
625,428 | 21,493,676 | 22,119,104 | |||||||||
Assumed from affiliates
|
79,681,894 | — | 79,681,894 | |||||||||
Ceded to nonaffiliates
|
(5,519,959 | ) | (3,935,973 | ) | (9,455,932 | ) | ||||||
Ceded to affiliates
|
(58,838,450 | ) | — | (58,838,450 | ) | |||||||
Net premiums earned
|
$ | 74,787,363 | $ | 17,557,703 | $ | 92,345,066 | ||||||
Losses and settlement expenses incurred
|
||||||||||||
Direct
|
$ | 41,773,466 | $ | — | $ | 41,773,466 | ||||||
Assumed from nonaffiliates
|
607,416 | 13,317,340 | 13,924,756 | |||||||||
Assumed from affiliates
|
44,188,891 | 183,651 | 44,372,542 | |||||||||
Ceded to nonaffiliates
|
(782,019 | ) | (1,472,655 | ) | (2,254,674 | ) | ||||||
Ceded to affiliates
|
(41,773,466 | ) | — | (41,773,466 | ) | |||||||
Net losses and settlement expenses incurred
|
$ | 44,014,288 | $ | 12,028,336 | $ | 56,042,624 |
Three months ended March 31, 2009
|
||||||||||||
Property and
|
||||||||||||
casualty
|
||||||||||||
insurance
|
Reinsurance
|
Total
|
||||||||||
Premiums written
|
||||||||||||
Direct
|
$ | 54,564,407 | $ | — | $ | 54,564,407 | ||||||
Assumed from nonaffiliates
|
562,247 | 17,159,964 | 17,722,211 | |||||||||
Assumed from affiliates
|
77,156,483 | — | 77,156,483 | |||||||||
Ceded to nonaffiliates
|
(5,689,500 | ) | (230,464 | ) | (5,919,964 | ) | ||||||
Ceded to affiliates
|
(54,564,407 | ) | — | (54,564,407 | ) | |||||||
Net premiums written
|
$ | 72,029,230 | $ | 16,929,500 | $ | 88,958,730 | ||||||
Premiums earned
|
||||||||||||
Direct
|
$ | 55,527,894 | $ | — | $ | 55,527,894 | ||||||
Assumed from nonaffiliates
|
663,455 | 16,671,463 | 17,334,918 | |||||||||
Assumed from affiliates
|
81,150,644 | — | 81,150,644 | |||||||||
Ceded to nonaffiliates
|
(5,732,497 | ) | (298,517 | ) | (6,031,014 | ) | ||||||
Ceded to affiliates
|
(55,527,894 | ) | — | (55,527,894 | ) | |||||||
Net premiums earned
|
$ | 76,081,602 | $ | 16,372,946 | $ | 92,454,548 | ||||||
Losses and settlement expenses incurred
|
||||||||||||
Direct
|
$ | 29,894,442 | $ | — | $ | 29,894,442 | ||||||
Assumed from nonaffiliates
|
441,405 | 13,170,009 | 13,611,414 | |||||||||
Assumed from affiliates
|
42,715,307 | 177,008 | 42,892,315 | |||||||||
Ceded to nonaffiliates
|
(2,311,545 | ) | (415,570 | ) | (2,727,115 | ) | ||||||
Ceded to affiliates
|
(29,894,442 | ) | — | (29,894,442 | ) | |||||||
Net losses and settlement expenses incurred
|
$ | 40,845,167 | $ | 12,931,447 | $ | 53,776,614 |
● |
“Direct” represents policies issued by the property and casualty insurance subsidiaries.
|
|
● |
“Assumed from nonaffiliates” for the property and casualty insurance subsidiaries represents their aggregate 30 percent pool participation percentage of the involuntary business assumed by the pool participants pursuant to state law. For the reinsurance subsidiary, this represents the reinsurance business assumed through the quota share agreement and the German-based reinsurance business assumed outside the quota share agreement.
|
|
● |
“Assumed from affiliates” for the property and casualty insurance subsidiaries represents their aggregate 30 percent pool participation percentage of all the pool members’ direct business. Losses and settlement expenses incurred also includes claim-related services provided by Employers Mutual that is allocated to the property and casualty insurance subsidiaries and the reinsurance subsidiary.
|
|
● |
“Ceded to nonaffiliates” for the property and casualty insurance subsidiaries represents their aggregate 30 percent pool participation percentage of the ceded reinsurance agreements that provide protection to the pool and each of its participants. For the reinsurance subsidiary, this line includes reinsurance business that is assumed under the quota share agreement and ceded on a 100 percent basis to other insurance companies in connection with “fronting” activities conducted by Employers Mutual.
|
|
● |
“Ceded to affiliates” represents the cession of the property and casualty insurance subsidiaries’ direct business to Employers Mutual under the terms of the pooling agreement.
|
Property and
|
||||||||||||||||
Three months ended
|
casualty
|
Parent
|
||||||||||||||
March 31, 2010
|
insurance
|
Reinsurance
|
company
|
Consolidated
|
||||||||||||
Premiums earned
|
$ | 74,787,363 | $ | 17,557,703 | $ | — | $ | 92,345,066 | ||||||||
Underwriting profit
|
1,116,596 | 601,075 | — | 1,717,671 | ||||||||||||
Net investment income
|
9,416,496 | 3,104,100 | (3,609 | ) | 12,516,987 | |||||||||||
Realized investment gains
|
405,511 | 119,402 | — | 524,913 | ||||||||||||
Other income
|
206,686 | — | — | 206,686 | ||||||||||||
Interest expense
|
225,000 | — | — | 225,000 | ||||||||||||
Other expenses
|
227,724 | (310,195 | ) | 280,674 | 198,203 | |||||||||||
Income (loss) before income tax expense (benefit)
|
$ | 10,692,565 | $ | 4,134,772 | $ | (284,283 | ) | $ | 14,543,054 | |||||||
Assets
|
$ | 876,088,849 | $ | 282,987,101 | $ | 359,263,780 | $ | 1,518,339,730 | ||||||||
Eliminations
|
— | — | (354,828,537 | ) | (354,828,537 | ) | ||||||||||
Reclassifications
|
— | — | (567,044 | ) | (567,044 | ) | ||||||||||
Net assets
|
$ | 876,088,849 | $ | 282,987,101 | $ | 3,868,199 | $ | 1,162,944,149 |
Property and
|
||||||||||||||||
Three months ended
|
casualty
|
Parent
|
||||||||||||||
March 31, 2009
|
insurance
|
Reinsurance
|
company
|
Consolidated
|
||||||||||||
Premiums earned
|
$ | 76,081,602 | $ | 16,372,946 | $ | - | $ | 92,454,548 | ||||||||
Underwriting profit (loss)
|
3,756,572 | (49,233 | ) | - | 3,707,339 | |||||||||||
Net investment income
|
9,219,519 | 3,045,049 | 12,667 | 12,277,235 | ||||||||||||
Realized investment losses
|
(5,790,171 | ) | (2,802,139 | ) | - | (8,592,310 | ) | |||||||||
Other income
|
152,986 | - | - | 152,986 | ||||||||||||
Interest expense
|
225,000 | - | - | 225,000 | ||||||||||||
Other expenses
|
231,134 | (151,129 | ) | 313,227 | 393,232 | |||||||||||
Income (loss) before income
|
||||||||||||||||
tax expense (benefit)
|
$ | 6,882,772 | $ | 344,806 | $ | (300,560 | ) | $ | 6,927,018 | |||||||
Year ended December 31, 2009
|
||||||||||||||||
Assets
|
$ | 883,361,416 | $ | 280,261,990 | $ | 342,901,891 | $ | 1,506,525,297 | ||||||||
Eliminations
|
- | - | (340,269,959 | ) | (340,269,959 | ) | ||||||||||
Reclassifications
|
- | - | (467,545 | ) | (467,545 | ) | ||||||||||
Net assets
|
$ | 883,361,416 | $ | 280,261,990 | $ | 2,164,387 | $ | 1,165,787,793 |
Three months ended March 31,
|
||||||||
2010
|
2009
|
|||||||
Property and casualty insurance segment
|
||||||||
Commercial lines:
|
||||||||
Automobile
|
$ | 15,871,169 | $ | 16,311,074 | ||||
Property
|
15,809,175 | 14,990,555 | ||||||
Workers’ compensation
|
15,653,372 | 16,297,392 | ||||||
Liability
|
14,400,002 | 15,929,506 | ||||||
Other
|
2,190,187 | 2,216,866 | ||||||
Total commercial lines
|
63,923,905 | 65,745,393 | ||||||
Personal lines:
|
||||||||
Automobile
|
6,080,351 | 5,619,224 | ||||||
Property
|
4,650,322 | 4,571,635 | ||||||
Liability
|
132,785 | 145,350 | ||||||
Total personal lines
|
10,863,458 | 10,336,209 | ||||||
Total property and casualty insurance
|
$ | 74,787,363 | $ | 76,081,602 | ||||
Reinsurance segment
|
||||||||
Pro rata reinsurance:
|
||||||||
Property and casualty
|
$ | 1,544,678 | $ | 1,533,008 | ||||
Property
|
2,381,062 | 3,388,434 | ||||||
Marine/Aviation
|
236,004 | 107,184 | ||||||
Casualty
|
544,763 | 373,236 | ||||||
Crop
|
66,267 | 63,682 | ||||||
Total pro rata reinsurance
|
4,772,774 | 5,465,544 | ||||||
Excess-of-loss reinsurance:
|
||||||||
Property
|
9,874,663 | 8,643,274 | ||||||
Casualty
|
2,910,040 | 2,274,430 | ||||||
Surety
|
226 | (10,302 | ) | |||||
Total excess-of-loss reinsurance
|
12,784,929 | 10,907,402 | ||||||
Total reinsurance
|
$ | 17,557,703 | $ | 16,372,946 | ||||
Consolidated
|
$ | 92,345,066 | $ | 92,454,548 |
Three months ended
|
||||||||
March 31,
|
||||||||
2010
|
2009
|
|||||||
Computed “expected” income tax expense
|
$ | 5,090,069 | $ | 2,424,456 | ||||
Increases (decreases) in tax resulting from:
|
||||||||
Tax-exempt interest income
|
(1,254,309 | ) | (1,295,905 | ) | ||||
Dividends received deduction
|
(116,173 | ) | (128,302 | ) | ||||
Proration of tax-exempt interest and dividends received deduction
|
205,572 | 213,631 | ||||||
Elimination of deduction for Medicare Part D retiree drug subsidy
|
794,383 | — | ||||||
Other, net
|
(54,580 | ) | (90,725 | ) | ||||
Income tax expense
|
$ | 4,664,962 | $ | 1,123,155 |
Three months ended
|
||||||||
March 31,
|
||||||||
2010
|
2009
|
|||||||
Pension plans:
|
||||||||
Service cost
|
$ | 2,860,970 | $ | 2,297,656 | ||||
Interest cost
|
2,498,263 | 2,569,411 | ||||||
Expected return on plan assets
|
(3,169,248 | ) | (2,480,734 | ) | ||||
Amortization of net actuarial loss
|
1,001,284 | 1,574,066 | ||||||
Amortization of prior service costs
|
113,020 | 113,074 | ||||||
Net periodic pension benefit cost
|
$ | 3,304,289 | $ | 4,073,473 |
Three months ended
|
||||||||
March 31,
|
||||||||
2010
|
2009
|
|||||||
Postretirement benefit plans:
|
||||||||
Service cost
|
$ | 982,900 | $ | 692,870 | ||||
Interest cost
|
1,383,440 | 1,070,393 | ||||||
Expected return on plan assets
|
(738,122 | ) | (603,005 | ) | ||||
Amortization of net actuarial loss
|
337,737 | 24,514 | ||||||
Amortization of prior service credit
|
(532,814 | ) | (532,814 | ) | ||||
Net periodic postretirement benefit cost
|
$ | 1,433,141 | $ | 651,958 |
2010
|
2009
|
|||||||
Dividend yield
|
3.48 | % | 3.82 | % | ||||
Expected volatility
|
16.7% - 23.6 | % | 22.7% - 43.8 | % | ||||
Weighted-average volatility
|
19.17 | % | 35.24 | % | ||||
Risk-free interest rate
|
0.16% - 2.99 | % | 0.38% - 2.81 | % | ||||
Expected term (years)
|
0.25 - 6.30 | 0.25 - 6.30 |
Carrying
|
Estimated
|
|||||||
amount
|
fair value
|
|||||||
March 31, 2010
|
||||||||
Assets:
|
||||||||
Fixed maturity securities held-to-maturity:
|
||||||||
Residential mortgage-backed
|
$ | 404,578 | $ | 457,654 | ||||
Total fixed maturity securities held-to-maturity
|
404,578 | 457,654 | ||||||
Fixed maturity securities available-for-sale:
|
||||||||
U.S. treasury
|
4,952,802 | 4,952,802 | ||||||
U.S. government-sponsored agencies
|
158,733,362 | 158,733,362 | ||||||
Obligations of states and political subdivisions
|
392,579,604 | 392,579,604 | ||||||
Commercial mortgage-backed
|
86,824,669 | 86,824,669 | ||||||
Residential mortgage-backed
|
28,829,514 | 28,829,514 | ||||||
Other asset-backed
|
9,672,451 | 9,672,451 | ||||||
Corporate
|
233,705,172 | 233,705,172 | ||||||
Total fixed maturity securities available-for-sale
|
915,297,574 | 915,297,574 | ||||||
Equity securities available-for-sale:
|
||||||||
Common stocks:
|
||||||||
Financial services
|
11,722,077 | 11,722,077 | ||||||
Information technology
|
19,895,204 | 19,895,204 | ||||||
Healthcare
|
12,352,065 | 12,352,065 | ||||||
Consumer staples
|
8,005,682 | 8,005,682 | ||||||
Consumer discretionary
|
9,139,329 | 9,139,329 | ||||||
Energy
|
9,476,922 | 9,476,922 | ||||||
Industrials
|
7,551,985 | 7,551,985 | ||||||
Other
|
8,993,735 | 8,993,735 | ||||||
Non-redeemable preferred stocks
|
8,837,750 | 8,837,750 | ||||||
Total equity securities available-for-sale
|
95,974,749 | 95,974,749 | ||||||
Short-term investments
|
42,591,167 | 42,591,167 | ||||||
Other long-term investments
|
43,028 | 43,028 | ||||||
Securities lending collateral
|
5,911,111 | 5,911,111 | ||||||
Liabilities:
|
||||||||
Surplus notes
|
25,000,000 | 23,068,987 | ||||||
Securities lending obligation
|
5,911,111 | 5,911,111 |
Carrying
|
Estimated
|
|||||||
amount
|
fair value
|
|||||||
December 31, 2009
|
||||||||
Assets:
|
||||||||
Fixed maturity securities held-to-maturity:
|
||||||||
Residential mortgage-backed
|
$ | 410,005 | $ | 460,877 | ||||
Total fixed maturity securities held-to-maturity
|
410,005 | 460,877 | ||||||
Fixed maturity securities available-for-sale:
|
||||||||
U.S. treasury
|
4,983,045 | 4,983,045 | ||||||
U.S. government-sponsored agencies
|
150,415,530 | 150,415,530 | ||||||
Obligations of states and political subdivisions
|
391,764,812 | 391,764,812 | ||||||
Commercial mortgage-backed
|
82,391,701 | 82,391,701 | ||||||
Residential mortgage-backed
|
31,055,295 | 31,055,295 | ||||||
Other asset-backed
|
9,885,609 | 9,885,609 | ||||||
Corporate
|
228,684,994 | 228,684,994 | ||||||
Total fixed maturity securities available-for-sale
|
899,180,986 | 899,180,986 | ||||||
Equity securities available-for-sale:
|
||||||||
Common stocks:
|
||||||||
Financial services
|
10,666,469 | 10,666,469 | ||||||
Information technology
|
19,693,053 | 19,693,053 | ||||||
Healthcare
|
12,935,253 | 12,935,253 | ||||||
Consumer staples
|
7,043,221 | 7,043,221 | ||||||
Consumer discretionary
|
7,581,367 | 7,581,367 | ||||||
Energy
|
8,811,055 | 8,811,055 | ||||||
Industrials
|
5,826,770 | 5,826,770 | ||||||
Other
|
9,370,291 | 9,370,291 | ||||||
Non-redeemable preferred stocks
|
8,262,500 | 8,262,500 | ||||||
Total equity securities available-for-sale
|
90,189,979 | 90,189,979 | ||||||
Short-term investments
|
55,390,096 | 55,390,096 | ||||||
Other long-term investments
|
47,083 | 47,083 | ||||||
Securities lending collateral
|
14,941,880 | 14,941,880 | ||||||
Liabilities:
|
||||||||
Surplus notes
|
25,000,000 | 22,752,800 | ||||||
Securities lending obligation
|
14,941,880 | 14,941,880 |
|
Level 1 - Unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.
|
|
Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.
|
|
Level 3 - Prices or valuation techniques that require significant unobservable inputs. The unobservable inputs may reflect the Company’s own judgments about the assumptions that market participants would use.
|
● |
U.S. Treasury securities (including bonds, notes, and bills) are priced according to a number of live data sources, including active market makers and inter-dealer brokers. Prices from these sources are reviewed based on the sources’ historical accuracy for individual issues and maturity ranges.
|
● |
U.S. government-sponsored agencies and corporate securities (including fixed-rate corporate bonds, medium-term notes, and retail notes) are priced by determining a bullet (non-call) spread scale for each issuer for maturities going out to forty years. These spreads represent credit risk and are obtained from the new issue market, secondary trading, and dealer quotes. An option adjusted spread model is incorporated to adjust spreads of issues that have early redemption features. The final spread is then added to the U.S. Treasury curve. For notes with odd coupon payment dates, a cash discounting yield/price routine calculates prices from final yields.
|
● |
Obligations of states and political subdivisions are priced by tracking and analyzing actively quoted issues and trades reported by the Municipal Securities Rulemaking Board (MSRB). Municipal bonds with similar characteristics are grouped together into market sectors, and internal yield curves are constructed daily for these sectors. Individual bond evaluations are extrapolated from these sectors, with the ability to make individual spread adjustments for attributes such as discounts, premiums, alternative minimum tax, and/or whether or not the bond is callable.
|
● |
Mortgage-backed securities are priced with models using spreads and other information solicited from Wall Street buy- and sell-side sources, including primary and secondary dealers, portfolio managers, and research analysts, to produce pricing for each tranche. To determine a tranche’s price, first the cash flow for each tranche is generated (using consensus prepayment speed assumptions including, as appropriate, a proprietary prepayment projection based on historical statistics of the underlying collateral), then a benchmark yield is determined (in relation to the U.S. Treasury curve for the maturity corresponding to the tranche’s average life estimate), and finally collateral performance and tranche level attributes are incorporated to adjust the benchmark yield to determine the tranche-specific spread. This is then used to discount the cash flows to generate the price. When cash flows or other security structure or market information is not available to appropriately price a security, broker quotes may be used with a zero spread bid-side valuation, resulting in the same values for the mean and ask prices.
|
Fair value measurements at March 31, 2010 using
|
||||||||||||||||
Quoted
|
||||||||||||||||
prices in
|
Significant
|
|||||||||||||||
active markets | other |
Significant
|
||||||||||||||
for identical
|
observable
|
unobservable
|
||||||||||||||
assets
|
inputs
|
inputs
|
||||||||||||||
Description
|
Total
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||||
Fixed maturity securities available-for-sale:
|
||||||||||||||||
U.S. treasury
|
$ | 4,952,802 | $ | — | $ | 4,952,802 | $ | — | ||||||||
U.S. government-sponsored agencies
|
158,733,362 | — | 158,733,362 | — | ||||||||||||
Obligations of states and political subdivisions
|
392,579,604 | — | 392,579,604 | — | ||||||||||||
Commercial mortgage-backed
|
86,824,669 | — | 86,824,669 | — | ||||||||||||
Residential mortgage-backed
|
28,829,514 | — | 28,829,514 | — | ||||||||||||
Other asset-backed
|
9,672,451 | — | 9,672,451 | — | ||||||||||||
Corporate
|
233,705,172 | — | 233,705,172 | — | ||||||||||||
Total fixed maturity securities available-for-sale
|
915,297,574 | — | 915,297,574 | — | ||||||||||||
Equity securities available-for-sale:
|
||||||||||||||||
Common stocks:
|
||||||||||||||||
Financial services
|
11,722,077 | 11,720,063 | — | 2,014 | ||||||||||||
Information technology
|
19,895,204 | 19,895,204 | — | — | ||||||||||||
Healthcare
|
12,352,065 | 12,352,065 | — | — | ||||||||||||
Consumer staples
|
8,005,682 | 8,005,682 | — | — | ||||||||||||
Consumer discretionary
|
9,139,329 | 9,139,329 | — | — | ||||||||||||
Energy
|
9,476,922 | 9,476,922 | — | — | ||||||||||||
Industrials
|
7,551,985 | 7,551,985 | — | — | ||||||||||||
Other
|
8,993,735 | 8,993,735 | — | — | ||||||||||||
Non-redeemable preferred stocks
|
8,837,750 | 8,837,750 | — | — | ||||||||||||
Total equity securities available-for-sale
|
95,974,749 | 95,972,735 | — | 2,014 | ||||||||||||
Short-term investments
|
42,591,167 | 42,591,167 | — | — | ||||||||||||
$ | 1,053,863,490 | $ | 138,563,902 | $ | 915,297,574 | $ | 2,014 |
Fair value measurements at December 31, 2009 using
|
||||||||||||||||
Quoted
|
||||||||||||||||
prices in
|
Significant
|
|||||||||||||||
active markets
|
other
|
Significant
|
||||||||||||||
for identical
|
observable
|
unobservable
|
||||||||||||||
assets
|
inputs
|
inputs
|
||||||||||||||
Description
|
Total
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||||
Fixed maturity securities available-for-sale:
|
||||||||||||||||
U.S. treasury
|
$ | 4,983,045 | $ | — | $ | 4,983,045 | $ | — | ||||||||
U.S. government-sponsored agencies
|
150,415,530 | — | 150,415,530 | — | ||||||||||||
Obligations of states and political subdivisions
|
391,764,812 | — | 391,764,812 | — | ||||||||||||
Commercial mortgage-backed
|
82,391,701 | — | 82,391,701 | — | ||||||||||||
Residential mortgage-backed
|
31,055,295 | — | 31,055,295 | — | ||||||||||||
Other asset-backed
|
9,885,609 | — | 9,885,609 | — | ||||||||||||
Corporate
|
228,684,994 | — | 228,684,994 | — | ||||||||||||
Total fixed maturity securities available-for-sale
|
899,180,986 | — | 899,180,986 | — | ||||||||||||
Equity securities available-for-sale:
|
||||||||||||||||
Common stocks:
|
||||||||||||||||
Financial services
|
10,666,469 | 10,664,455 | — | 2,014 | ||||||||||||
Information technology
|
19,693,053 | 19,693,053 | — | — | ||||||||||||
Healthcare
|
12,935,253 | 12,935,253 | — | — | ||||||||||||
Consumer staples
|
7,043,221 | 7,043,221 | — | — | ||||||||||||
Consumer discretionary
|
7,581,367 | 7,581,367 | — | — | ||||||||||||
Energy
|
8,811,055 | 8,811,055 | — | — | ||||||||||||
Industrials
|
5,826,770 | 5,826,770 | — | — | ||||||||||||
Other
|
9,370,291 | 9,370,291 | — | — | ||||||||||||
Non-redeemable preferred stocks
|
8,262,500 | 8,262,500 | — | — | ||||||||||||
Total equity securities available-for-sale
|
90,189,979 | 90,187,965 | — | 2,014 | ||||||||||||
Short-term investments
|
55,390,096 | 55,390,096 | — | — | ||||||||||||
$ | 1,044,761,061 | $ | 145,578,061 | $ | 899,180,986 | $ | 2,014 |
Fair value measurements using significant
|
||||||||
unobservable inputs (Level 3)
|
||||||||
Equity securities
|
||||||||
available-for-sale,
|
||||||||
Financial services
|
Total
|
|||||||
Balance at December 31, 2009
|
$ | 2,014 | $ | 2,014 | ||||
Total unrealized gains included in other comprehensive income
|
— | — | ||||||
Balance at March 31, 2010
|
$ | 2,014 | $ | 2,014 |
Fair value measurements using significant
|
||||||||
unobservable inputs (Level 3)
|
||||||||
Equity securities
|
||||||||
available-for-sale,
|
||||||||
Financial services
|
Total
|
|||||||
Balance at December 31, 2008
|
$ | 14,969,143 | $ | 14,969,143 | ||||
Total unrealized gains included in other comprehensive income
|
— | — | ||||||
Balance at March 31, 2009
|
$ | 14,969,143 | $ | 14,969,143 |
Gross
|
Gross
|
|||||||||||||||
Amortized
|
unrealized
|
unrealized
|
Estimated
|
|||||||||||||
March 31, 2010
|
cost
|
gains
|
losses
|
fair value
|
||||||||||||
Securities held-to-maturity:
|
||||||||||||||||
Fixed maturity securities:
|
||||||||||||||||
Residential mortgage-backed
|
$ | 404,578 | $ | 53,076 | $ | — | $ | 457,654 | ||||||||
Total securities held-to-maturity
|
$ | 404,578 | $ | 53,076 | $ | — | $ | 457,654 | ||||||||
Securities available-for-sale:
|
||||||||||||||||
Fixed maturity securities:
|
||||||||||||||||
U.S. treasury
|
$ | 4,741,299 | $ | 211,503 | $ | — | $ | 4,952,802 | ||||||||
U.S. government-sponsored agencies
|
156,968,459 | 1,900,615 | 135,712 | 158,733,362 | ||||||||||||
Obligations of states and political subdivisions
|
380,498,191 | 15,049,987 | 2,968,574 | 392,579,604 | ||||||||||||
Commercial mortgage-backed
|
77,695,520 | 9,132,689 | 3,540 | 86,824,669 | ||||||||||||
Residential mortgage-backed
|
28,341,596 | 1,058,383 | 570,465 | 28,829,514 | ||||||||||||
Other asset-backed
|
8,917,318 | 755,133 | — | 9,672,451 | ||||||||||||
Corporate
|
223,254,539 | 11,397,077 | 946,444 | 233,705,172 | ||||||||||||
Total fixed maturity securities
|
880,416,922 | 39,505,387 | 4,624,735 | 915,297,574 | ||||||||||||
Equity securities:
|
||||||||||||||||
Common stocks:
|
||||||||||||||||
Financial services
|
7,817,464 | 3,904,613 | — | 11,722,077 | ||||||||||||
Information technology
|
13,583,754 | 6,327,721 | 16,271 | 19,895,204 | ||||||||||||
Healthcare
|
9,333,396 | 3,026,884 | 8,215 | 12,352,065 | ||||||||||||
Consumer staples
|
6,435,465 | 1,570,402 | 185 | 8,005,682 | ||||||||||||
Consumer discretionary
|
6,191,152 | 2,949,254 | 1,077 | 9,139,329 | ||||||||||||
Energy
|
7,700,453 | 1,795,668 | 19,199 | 9,476,922 | ||||||||||||
Industrials
|
6,058,432 | 1,493,785 | 232 | 7,551,985 | ||||||||||||
Other
|
7,387,105 | 1,633,595 | 26,965 | 8,993,735 | ||||||||||||
Non-redeemable preferred stocks
|
9,500,000 | 176,400 | 838,650 | 8,837,750 | ||||||||||||
Total equity securities
|
74,007,221 | 22,878,322 | 910,794 | 95,974,749 | ||||||||||||
Total securities available-for-sale
|
$ | 954,424,143 | $ | 62,383,709 | $ | 5,535,529 | $ | 1,011,272,323 |
Gross
|
Gross
|
|||||||||||||||
Amortized
|
unrealized
|
unrealized
|
Estimated
|
|||||||||||||
December 31, 2009
|
cost
|
gains
|
losses
|
fair value
|
||||||||||||
Securities held-to-maturity:
|
||||||||||||||||
Fixed maturity securities:
|
||||||||||||||||
Residential mortgage-backed
|
$ | 410,005 | $ | 50,872 | $ | — | $ | 460,877 | ||||||||
Total securities held-to-maturity
|
$ | 410,005 | $ | 50,872 | $ | — | $ | 460,877 | ||||||||
Securities available-for-sale:
|
||||||||||||||||
Fixed maturity securities:
|
||||||||||||||||
U.S. treasury
|
$ | 4,739,194 | $ | 243,851 | $ | — | $ | 4,983,045 | ||||||||
U.S. government-sponsored agencies
|
151,440,800 | 1,011,484 | 2,036,754 | 150,415,530 | ||||||||||||
Obligations of states and political subdivisions
|
380,605,547 | 15,604,731 | 4,445,466 | 391,764,812 | ||||||||||||
Commercial mortgage-backed
|
75,563,896 | 6,827,805 | — | 82,391,701 | ||||||||||||
Residential mortgage-backed
|
31,017,352 | 961,646 | 923,703 | 31,055,295 | ||||||||||||
Other asset-backed
|
9,164,445 | 739,434 | 18,270 | 9,885,609 | ||||||||||||
Corporate
|
219,663,540 | 10,284,043 | 1,262,589 | 228,684,994 | ||||||||||||
Total fixed maturity securities
|
872,194,774 | 35,672,994 | 8,686,782 | 899,180,986 | ||||||||||||
Equity securities:
|
||||||||||||||||
Common stocks:
|
||||||||||||||||
Financial services
|
7,447,765 | 3,276,169 | 57,465 | 10,666,469 | ||||||||||||
Information technology
|
13,366,462 | 6,326,591 | — | 19,693,053 | ||||||||||||
Healthcare
|
10,066,840 | 2,901,926 | 33,513 | 12,935,253 | ||||||||||||
Consumer staples
|
6,323,889 | 768,181 | 48,849 | 7,043,221 | ||||||||||||
Consumer discretionary
|
6,100,052 | 1,499,876 | 18,561 | 7,581,367 | ||||||||||||
Energy
|
6,995,036 | 1,858,794 | 42,775 | 8,811,055 | ||||||||||||
Industrials
|
5,239,316 | 683,747 | 96,293 | 5,826,770 | ||||||||||||
Other
|
8,075,560 | 1,324,137 | 29,406 | 9,370,291 | ||||||||||||
Non-redeemable preferred stocks
|
9,500,000 | 15,500 | 1,253,000 | 8,262,500 | ||||||||||||
Total equity securities
|
73,114,920 | 18,654,921 | 1,579,862 | 90,189,979 | ||||||||||||
Total securities available-for-sale
|
$ | 945,309,694 | $ | 54,327,915 | $ | 10,266,644 | $ | 989,370,965 |
March 31, 2010
|
Less than twelve months
|
Twelve months or longer
|
Total
|
|||||||||||||||||||||
Fair
|
Unrealized
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
|||||||||||||||||||
value
|
losses
|
value
|
losses
|
value
|
losses
|
|||||||||||||||||||
Fixed maturity securities:
|
||||||||||||||||||||||||
U.S. government-sponsored agencies
|
$ | 33,692,077 | $ | 135,712 | $ | — | $ | — | $ | 33,692,077 | $ | 135,712 | ||||||||||||
Obligations of states and political subdivisions
|
65,615,536 | 2,398,763 | 6,358,330 | 569,811 | 71,973,866 | 2,968,574 | ||||||||||||||||||
Commercial mortgage-backed
|
1,926,289 | 3,540 | — | — | 1,926,289 | 3,540 | ||||||||||||||||||
Residential mortgage-backed
|
4,179,950 | 78,859 | 7,146,039 | 491,606 | 11,325,989 | 570,465 | ||||||||||||||||||
Corporate
|
19,446,847 | 406,249 | 18,870,107 | 540,195 | 38,316,954 | 946,444 | ||||||||||||||||||
Total, fixed maturity securities
|
124,860,699 | 3,023,123 | 32,374,476 | 1,601,612 | 157,235,175 | 4,624,735 | ||||||||||||||||||
Equity securities:
|
||||||||||||||||||||||||
Common stocks:
|
||||||||||||||||||||||||
Information technology
|
772,150 | 16,271 | — | — | 772,150 | 16,271 | ||||||||||||||||||
Healthcare
|
676,880 | 8,215 | — | — | 676,880 | 8,215 | ||||||||||||||||||
Consumer staples
|
109,820 | 185 | — | — | 109,820 | 185 | ||||||||||||||||||
Consumer discretionary
|
192,717 | 1,077 | — | — | 192,717 | 1,077 | ||||||||||||||||||
Energy
|
960,424 | 19,199 | — | — | 960,424 | 19,199 | ||||||||||||||||||
Industrials
|
662,592 | 232 | — | — | 662,592 | 232 | ||||||||||||||||||
Other
|
226,412 | 26,965 | — | — | 226,412 | 26,965 | ||||||||||||||||||
Non-redeemable preferred stocks
|
499,750 | 250 | 4,161,600 | 838,400 | 4,661,350 | 838,650 | ||||||||||||||||||
Total, equity securities
|
4,100,745 | 72,394 | 4,161,600 | 838,400 | 8,262,345 | 910,794 | ||||||||||||||||||
Total temporarily impaired securities
|
$ | 128,961,444 | $ | 3,095,517 | $ | 36,536,076 | $ | 2,440,012 | $ | 165,497,520 | $ | 5,535,529 |
December 31, 2009
|
Less than twelve months
|
Twelve months or longer
|
Total
|
|||||||||||||||||||||
Fair
|
Unrealized
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
|||||||||||||||||||
value
|
losses
|
value
|
losses
|
value
|
losses
|
|||||||||||||||||||
Fixed maturity securities:
|
||||||||||||||||||||||||
U.S. government-sponsored agencies
|
$ | 102,035,965 | $ | 2,036,754 | $ | — | $ | — | $ | 102,035,965 | $ | 2,036,754 | ||||||||||||
Obligations of states and political subdivisions
|
83,487,876 | 3,832,182 | 6,314,420 | 613,284 | 89,802,296 | 4,445,466 | ||||||||||||||||||
Residential mortgage-backed
|
3,317,513 | 93,216 | 10,535,690 | 830,487 | 13,853,203 | 923,703 | ||||||||||||||||||
Other asset-backed
|
— | — | 503,730 | 18,270 | 503,730 | 18,270 | ||||||||||||||||||
Corporate
|
43,994,473 | 684,520 | 18,830,648 | 578,069 | 62,825,121 | 1,262,589 | ||||||||||||||||||
Total, fixed maturity securities
|
232,835,827 | 6,646,672 | 36,184,488 | 2,040,110 | 269,020,315 | 8,686,782 | ||||||||||||||||||
Equity securities:
|
||||||||||||||||||||||||
Common stocks:
|
||||||||||||||||||||||||
Financial services
|
1,092,716 | 57,465 | — | — | 1,092,716 | 57,465 | ||||||||||||||||||
Healthcare
|
1,550,018 | 33,513 | — | — | 1,550,018 | 33,513 | ||||||||||||||||||
Consumer staples
|
1,901,671 | 48,849 | — | — | 1,901,671 | 48,849 | ||||||||||||||||||
Consumer discretionary
|
406,500 | 18,561 | — | — | 406,500 | 18,561 | ||||||||||||||||||
Energy
|
1,502,064 | 42,775 | — | — | 1,502,064 | 42,775 | ||||||||||||||||||
Industrials
|
1,387,906 | 96,293 | — | — | 1,387,906 | 96,293 | ||||||||||||||||||
Other
|
2,078,197 | 29,406 | — | — | 2,078,197 | 29,406 | ||||||||||||||||||
Non-redeemable preferred stocks
|
— | — | 5,247,000 | 1,253,000 | 5,247,000 | 1,253,000 | ||||||||||||||||||
Total, equity securities
|
9,919,072 | 326,862 | 5,247,000 | 1,253,000 | 15,166,072 | 1,579,862 | ||||||||||||||||||
Total temporarily impaired securities
|
$ | 242,754,899 | $ | 6,973,534 | $ | 41,431,488 | $ | 3,293,110 | $ | 284,186,387 | $ | 10,266,644 |
Amortized
|
Estimated
|
|||||||
cost
|
fair value
|
|||||||
Securities held-to-maturity:
|
||||||||
Due in one year or less
|
$ | — | $ | — | ||||
Due after one year through five years
|
— | — | ||||||
Due after five years through ten years
|
— | — | ||||||
Due after ten years
|
— | — | ||||||
Mortgage-backed securities
|
404,578 | 457,654 | ||||||
Totals
|
$ | 404,578 | $ | 457,654 | ||||
Securities available-for-sale:
|
||||||||
Due in one year or less
|
$ | 25,083,767 | $ | 25,956,442 | ||||
Due after one year through five years
|
87,929,530 | 92,967,522 | ||||||
Due after five years through ten years
|
105,543,872 | 111,069,703 | ||||||
Due after ten years
|
555,822,637 | 569,649,724 | ||||||
Mortgage-backed securities
|
106,037,116 | 115,654,183 | ||||||
Totals
|
$ | 880,416,922 | $ | 915,297,574 |
Three months ended
|
||||||||
March 31,
|
||||||||
2010
|
2009
|
|||||||
Fixed maturity securities available-for-sale:
|
||||||||
Gross realized investment gains
|
$ | 11,134 | $ | 76,316 | ||||
Gross realized investment losses
|
— | — | ||||||
“Other-than-temporary” impairments
|
(204,045 | ) | (2,219,779 | ) | ||||
Equity securities available-for-sale:
|
||||||||
Gross realized investment gains
|
901,588 | 1,298,611 | ||||||
Gross realized investment losses
|
(35,414 | ) | (1,609,887 | ) | ||||
“Other-than-temporary” impairments
|
(148,350 | ) | (6,137,571 | ) | ||||
Totals
|
$ | 524,913 | $ | (8,592,310 | ) |
Credit losses
|
||||
recognized
|
||||
Three months ended March 31, 2010
|
in earnings
|
|||
Balance at January 1, 2010
|
$ | 87,315 | ||
Additional increases to the amount related to credit loss for which an “other-than-temporary” impairment loss was previously recognized
|
120,539 | |||
Balance at March 31, 2010
|
$ | 207,854 |
● |
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.
|
Three months ended
|
||||||||
March 31,
|
||||||||
($ in thousands)
|
2010
|
2009
|
||||||
Property and Casualty Insurance
|
||||||||
Premiums earned
|
$ | 74,787 | $ | 76,082 | ||||
Losses and settlement expenses
|
44,014 | 40,845 | ||||||
Acquisition and other expenses
|
29,657 | 31,480 | ||||||
Underwriting profit
|
$ | 1,116 | $ | 3,757 | ||||
Loss and settlement expense ratio
|
58.9 | % | 53.7 | % | ||||
Acquisition expense ratio
|
39.6 | % | 41.4 | % | ||||
Combined ratio
|
98.5 | % | 95.1 | % | ||||
Losses and settlement expenses:
|
||||||||
Insured events of current year
|
$ | 57,626 | $ | 57,684 | ||||
Decrease in provision for insured events of prior years
|
(13,612 | ) | (16,839 | ) | ||||
Total losses and settlement expenses
|
$ | 44,014 | $ | 40,845 | ||||
Catastrophe and storm losses
|
$ | 2,364 | $ | 2,244 |
Three months ended
|
||||||||
March 31,
|
||||||||
($ in thousands)
|
2010
|
2009
|
||||||
Reinsurance
|
||||||||
Premiums earned
|
$ | 17,558 | $ | 16,373 | ||||
Losses and settlement expenses
|
12,029 | 12,932 | ||||||
Acquisition and other expenses
|
4,928 | 3,491 | ||||||
Underwriting profit (loss)
|
$ | 601 | $ | (50 | ) | |||
Loss and settlement expense ratio
|
68.5 | % | 79.0 | % | ||||
Acquisition expense ratio
|
28.1 | % | 21.3 | % | ||||
Combined ratio
|
96.6 | % | 100.3 | % | ||||
Losses and settlement expenses:
|
||||||||
Insured events of current year
|
$ | 19,837 | $ | 17,151 | ||||
Decrease in provision for insured events of prior years
|
(7,808 | ) | (4,219 | ) | ||||
Total losses and settlement expenses
|
$ | 12,029 | $ | 12,932 | ||||
Catastrophe and storm losses
|
$ | 1,057 | $ | 1,468 |
Three months ended
|
||||||||
March 31,
|
||||||||
($ in thousands)
|
2010
|
2009
|
||||||
Consolidated
|
||||||||
REVENUES
|
||||||||
Premiums earned
|
$ | 92,345 | $ | 92,455 | ||||
Net investment income
|
12,517 | 12,277 | ||||||
Realized investment gains (losses)
|
525 | (8,592 | ) | |||||
Other income
|
207 | 153 | ||||||
105,594 | 96,293 | |||||||
LOSSES AND EXPENSES
|
||||||||
Losses and settlement expenses
|
56,043 | 53,777 | ||||||
Acquisition and other expenses
|
34,585 | 34,971 | ||||||
Interest expense
|
225 | 225 | ||||||
Other expense
|
198 | 393 | ||||||
91,051 | 89,366 | |||||||
Income before income tax expense
|
14,543 | 6,927 | ||||||
Income tax expense
|
4,665 | 1,123 | ||||||
Net income
|
$ | 9,878 | $ | 5,804 | ||||
Net income per share
|
$ | 0.75 | $ | 0.44 | ||||
Loss and settlement expense ratio
|
60.7 | % | 58.2 | % | ||||
Acquisition expense ratio
|
37.4 | % | 37.8 | % | ||||
Combined ratio
|
98.1 | % | 96.0 | % | ||||
Losses and settlement expenses:
|
||||||||
Insured events of current year
|
$ | 77,463 | $ | 74,835 | ||||
Decrease in provision for insured events of prior years
|
(21,420 | ) | (21,058 | ) | ||||
Total losses and settlement expenses
|
$ | 56,043 | $ | 53,777 | ||||
Catastrophe and storm losses
|
$ | 3,421 | $ | 3,712 |
March 31, 2010
|
||||||||||||||||
Percent of
|
||||||||||||||||
Amortized
|
Fair
|
total
|
Carrying
|
|||||||||||||
($ in thousands)
|
cost
|
value
|
fair value
|
value
|
||||||||||||
Fixed maturity securities held-to-maturity
|
$ | 405 | $ | 458 | — | % | $ | 405 | ||||||||
Fixed maturity securities available-for-sale
|
880,417 | 915,297 | 86.8 | 915,297 | ||||||||||||
Equity securities available-for-sale
|
74,007 | 95,975 | 9.1 | 95,975 | ||||||||||||
Cash
|
534 | 534 | 0.1 | 534 | ||||||||||||
Short-term investments
|
42,591 | 42,591 | 4.0 | 42,591 | ||||||||||||
Other long-term investments
|
43 | 43 | — | 43 | ||||||||||||
$ | 997,997 | $ | 1,054,898 | 100.0 | % | $ | 1,054,845 |
December 31, 2009
|
||||||||||||||||
Percent of | ||||||||||||||||
Amortized
|
Fair
|
total |
Carrying
|
|||||||||||||
($ in thousands)
|
cost
|
value
|
fair value |
value
|
||||||||||||
Fixed maturity securities held-to-maturity
|
$ | 410 | $ | 461 | 0.1 | % | $ | 410 | ||||||||
Fixed maturity securities available-for-sale
|
872,195 | 899,181 | 86.0 | 899,181 | ||||||||||||
Equity securities available-for-sale
|
73,115 | 90,190 | 8.6 | 90,190 | ||||||||||||
Cash
|
279 | 279 | — | 279 | ||||||||||||
Short-term investments
|
55,390 | 55,390 | 5.3 | 55,390 | ||||||||||||
Other long-term investments
|
47 | 47 | — | 47 | ||||||||||||
$ | 1,001,436 | $ | 1,045,548 | 100.0 | % | $ | 1,045,497 |
Gross
|
Gross
|
|||||||||||||||
Amortized
|
unrealized
|
unrealized
|
Estimated
|
|||||||||||||
($ in thousands)
|
cost
|
gains
|
losses
|
fair value
|
||||||||||||
Securities held-to-maturity:
|
||||||||||||||||
Fixed maturity securities:
|
||||||||||||||||
Residential mortgage-backed
|
$ | 405 | $ | 53 | $ | — | $ | 458 | ||||||||
Total securities held-to-maturity
|
$ | 405 | $ | 53 | $ | — | $ | 458 | ||||||||
Securities available-for-sale:
|
||||||||||||||||
Fixed maturity securities:
|
||||||||||||||||
U.S. treasury
|
$ | 4,741 | $ | 212 | $ | — | $ | 4,953 | ||||||||
U.S. government-sponsored agencies
|
156,968 | 1,901 | 136 | 158,733 | ||||||||||||
Obligations of states and political subdivisions
|
380,498 | 15,050 | 2,969 | 392,579 | ||||||||||||
Commercial mortgage-backed
|
77,696 | 9,133 | 4 | 86,825 | ||||||||||||
Residential mortgage-backed
|
28,342 | 1,058 | 570 | 28,830 | ||||||||||||
Other asset-backed
|
8,917 | 755 | — | 9,672 | ||||||||||||
Corporate
|
223,255 | 11,397 | 946 | 233,706 | ||||||||||||
Total fixed maturity securities
|
880,417 | 39,506 | 4,625 | 915,298 | ||||||||||||
Equity securities:
|
||||||||||||||||
Common stocks:
|
||||||||||||||||
Financial services
|
7,817 | 3,905 | — | 11,722 | ||||||||||||
Information technology
|
13,584 | 6,327 | 16 | 19,895 | ||||||||||||
Healthcare
|
9,333 | 3,027 | 8 | 12,352 | ||||||||||||
Consumer staples
|
6,436 | 1,570 | — | 8,006 | ||||||||||||
Consumer discretionary
|
6,191 | 2,949 | 1 | 9,139 | ||||||||||||
Energy
|
7,700 | 1,796 | 19 | 9,477 | ||||||||||||
Industrials
|
6,059 | 1,493 | 1 | 7,551 | ||||||||||||
Other
|
7,387 | 1,634 | 27 | 8,994 | ||||||||||||
Non-redeemable preferred stocks
|
9,500 | 177 | 839 | 8,838 | ||||||||||||
Total equity securities
|
74,007 | 22,878 | 911 | 95,974 | ||||||||||||
Total securities available-for-sale
|
$ | 954,424 | $ | 62,384 | $ | 5,536 | $ | 1,011,272 |
March 31, 2010 |
Less than twelve months
|
Twelve months or longer
|
Total
|
|||||||||||||||||||||
($ in thousands)
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
||||||||||||||||||
value
|
losses
|
value
|
losses
|
value
|
losses
|
|||||||||||||||||||
Fixed maturity securities:
|
||||||||||||||||||||||||
U.S. government-sponsored agencies
|
$ | 33,692 | $ | 136 | $ | — | $ | — | $ | 33,692 | $ | 136 | ||||||||||||
Obligations of states and political subdivisions
|
65,616 | 2,399 | 6,358 | 570 | 71,974 | 2,969 | ||||||||||||||||||
Commercial mortgage-backed
|
1,926 | 4 | — | — | 1,926 | 4 | ||||||||||||||||||
Residential mortgage-backed
|
4,180 | 78 | 7,146 | 492 | 11,326 | 570 | ||||||||||||||||||
Corporate
|
19,447 | 406 | 18,870 | 540 | 38,317 | 946 | ||||||||||||||||||
Total, fixed maturity securities
|
124,861 | 3,023 | 32,374 | 1,602 | 157,235 | 4,625 | ||||||||||||||||||
Equity securities:
|
||||||||||||||||||||||||
Common stocks:
|
||||||||||||||||||||||||
Information technology
|
772 | 16 | — | — | 772 | 16 | ||||||||||||||||||
Healthcare
|
677 | 8 | — | — | 677 | 8 | ||||||||||||||||||
Consumer staples
|
110 | — | — | — | 110 | — | ||||||||||||||||||
Consumer discretionary
|
193 | 1 | — | — | 193 | 1 | ||||||||||||||||||
Energy
|
960 | 19 | — | — | 960 | 19 | ||||||||||||||||||
Industrials
|
663 | 1 | — | — | 663 | 1 | ||||||||||||||||||
Other
|
226 | 27 | — | — | 226 | 27 | ||||||||||||||||||
Non-redeemable preferred stocks
|
500 | — | 4,162 | 839 | 4,662 | 839 | ||||||||||||||||||
Total, equity securities
|
4,101 | 72 | 4,162 | 839 | 8,263 | 911 | ||||||||||||||||||
Total temporarily impaired securities
|
$ | 128,962 | $ | 3,095 | $ | 36,536 | $ | 2,441 | $ | 165,498 | $ | 5,536 |
Three months ended March 31, 2010
|
||||||||||||||||||||
Realized losses from sales
|
“Other-than-
|
Total
|
||||||||||||||||||
Gross
|
temporary”
|
gross
|
||||||||||||||||||
Book
|
Sales
|
realized
|
impairment
|
realized
|
||||||||||||||||
($ in thousands)
|
value
|
price
|
losses
|
losses
|
losses
|
|||||||||||||||
Fixed maturity securities:
|
||||||||||||||||||||
Three months or less
|
$ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Over three months to six months
|
— | — | — | — | — | |||||||||||||||
Over six months to nine months
|
— | — | — | — | — | |||||||||||||||
Over nine months to twelve months
|
— | — | — | — | — | |||||||||||||||
Over twelve months
|
— | — | — | 204 | 204 | |||||||||||||||
— | — | — | 204 | 204 | ||||||||||||||||
Equity securities:
|
||||||||||||||||||||
Three months or less
|
1,661 | 1,635 | 26 | 112 | 138 | |||||||||||||||
Over three months to six months
|
46 | 37 | 9 | 36 | 45 | |||||||||||||||
Over six months to nine months
|
— | — | — | — | — | |||||||||||||||
Over nine months to twelve months
|
— | — | — | — | — | |||||||||||||||
Over twelve months
|
— | — | — | — | — | |||||||||||||||
1,707 | 1,672 | 35 | 148 | 183 | ||||||||||||||||
$ | 1,707 | $ | 1,672 | $ | 35 | $ | 352 | $ | 387 |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
PART II. | OTHER INFORMATION |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Period
|
(a) Total
number of |
(b) Average
price |
(c) Total number
of shares (or |
(d) Maximum number
(or approximate dollar |
||||||||||||
1/1/10 - 1/31/10
|
6,540 | (1) | $ | 22.10 | — | $ | 11,638,663 | |||||||||
2/1/10 - 2/28/10
|
22 | (1) | 20.48 | — | 11,638,663 | |||||||||||
3/1/10 - 3/31/10
|
1,397 | (1) | 22.33 | — | 11,638,663 | |||||||||||
Total
|
7,959 | $ | 22.14 | — |
(1)
|
Included in these amounts are 53, 22 and 1,397 shares purchased in the open market in January, February and March, respectively, to fulfill the Company’s obligations under its dividend reinvestment and common stock purchase plan. 6,487 shares were purchased in the open market during January under Employers Mutual Casualty Company’s employee stock purchase plan.
|
(2)
|
On March 10, 2008, the Company’s Board of Directors authorized a $15,000,000 stock repurchase program and on October 31, 2008, announced an extension of the program, authorizing an additional $10,000,000. This purchase program was effective immediately and does not have an expiration date. A total of $7,148,102 remains available in this plan for the purchase of additional shares.
|
(3)
|
On May 12, 2005, the Company announced that its parent company, Employers Mutual Casualty Company, had initiated a $15,000,000 stock purchase program under which Employers Mutual would purchase shares of the Company’s common stock in the open market. This purchase program was effective immediately and does not have an expiration date; however, this program is currently dormant and will remain so while the Company’s repurchase program is active. A total of $4,490,561 remains in this plan.
|
ITEM 6. | EXHIBITS | ||
10.2.4
|
2009 Executive Contingent Salary Plan – EMC Reinsurance Company
|
||
31.1
|
Certification of President and Chief Executive Officer as required by Section 302 of the Sarbanes-Oxley Act of 2002.
|
||
31.2
|
Certification of Senior Vice President and Chief Financial Officer as required by Section 302 of the Sarbanes-Oxley Act of 2002.
|
||
32.1
|
Certification of the President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
||
32.2
|
Certification of the Senior Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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EMC INSURANCE GROUP INC.
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Registrant
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/s/ Bruce G. Kelley
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Bruce G. Kelley
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President and Chief Executive Officer
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(Principal Executive Officer)
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/s/ Mark E. Reese
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Mark E. Reese
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Senior Vice President and
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Chief Financial Officer
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(Principal Accounting Officer)
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Exhibit
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Item
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