EMC Insurance Group Inc. (NASDAQ:EMCI) Q3 2018 Earnings Conference Call Transcript
Nov 07, 2018 • 12:00 pm ET
Good day, and welcome to the EMC Insurance Group 2018 Third Quarter Earnings Conference Call.
All participants will be in listen-only mode. (Operator Instructions) Please note, this event is being recorded.
I'd now like to turn the conference over to Steve Walsh, Director of Investor Relations. Please go ahead, sir.
Thank you, Laura. Good afternoon, everyone, and welcome to EMC Insurance Group's 2018 third quarter earnings conference call. A copy of the news release is available on the Investor Relations page of our website, which can be found at investors.emcins.com. The archived audio webcast will be available for replay for approximately 90 days, following the earnings call.
(Forward-Looking Cautionary Statements)
Additional information about factors that could affect future results is addressed in our SEC filings, including forms S-1, 10-K, 10-Q and 8-K. Any information provided today should be read in conjunction with the 2018 third quarter earnings release with accompanying financial tables issued earlier today. Certain non-GAAP terms may be used during today's discussion. Please refer to the company's press release and SEC filings for a description and reconciliation of these terms.
Speaking today will be Bruce Kelley, President and Chief Executive Officer; Mick Lovell, Executive Vice President of Operations; Mark Reese, Senior Vice President and Chief Financial Officer; and Scott Jean, Executive Vice President of Finance and Strategy. They, along with the other executive officers, will be available to answer questions following their prepared remarks.
So at this time, it's my pleasure to introduce the company's President and CEO, Bruce Kelley.
This morning, we reported net income of $19.1 million for the third quarter of 2018 compared to net income of $746,000 in the third quarter of 2017. Included in net income reported for the third quarter of 2018, is a $9.5 million pre-tax increase in unrealized investment gains on our equity investments.
This was required by updated accounting guidance, which was adopted by the company at the beginning of 2018. Excluding this amount, the primary driver of the increase in net income for the third quarter is a significantly lower level of catastrophe and storm losses in the reinsurance segment. These losses have been well below average all year.
As a result, the reinsurance segment's GAAP combined ratio improved to 101.2%, down from 152.3% reported in the third quarter of 2017, which included a record amount of catastrophe and storm losses due primarily to Hurricanes Harvey, Irma and Maria.
This improvement was partially offset by a substantial increase in catastrophe and storm losses in the property and casualty insurance segment due to a few severe Midwest storms primarily impacting the state of Iowa, and losses that resulted from Hurricane Florence.
An increase in favorable development on prior years' reserves and an improvement in the underlying loss and settlement expense ratio helped mitigate the impact of these events as this segment reported a GAAP combined ratio of 99.6% compared to the 94.6% reported in the third quarter of 2017.
Also included in net income reported in the third quarter of