EMC Insurance Group Inc. (NASDAQ:EMCI) Q4 2018 Earnings Conference Call Transcript

Feb 07, 2019 • 12:00 pm ET


EMC Insurance Group Inc. (NASDAQ:EMCI) Q4 2018 Earnings Conference Call Transcript


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Good day, and welcome to the EMC Insurance Group Fourth Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Steve Walsh, Director of Investor Relations. Please go ahead.

Steven T. Walsh

Thank you, Carrie. Good afternoon, everyone, and welcome to EMC Insurance Group's 2018 fourth quarter earnings conference call. 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 our earnings call.

This presentation includes some forward-looking statements about our expectations for our future performance. These statements are not guarantees of future performance and actual results could differ materially from those suggested by our comments today due to a variety of factors. 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 fourth 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.

Before we get started, I'd like to note that we will not have a question-and-answer session following our prepared remarks today due to the pending non-binding indicative proposal submitted by EMC Insurance Group's parent company Employers Mutual Casualty Company or Employers Mutual on November 15, 2018 to purchase all the outstanding common stock of EMC Insurance Group it does not already own.

Speaking today will be Bruce Kelley, President and Chief Executive Officer; Mick Lovell, Executive Vice President of Operations; and Mark Reese, Senior Vice President and Chief Financial Officer.

At this time, it's my pleasure to introduce the Company's President and CEO, Bruce Kelley.

Bruce G. Kelley

Thank you, Steve. And welcome to those joining us today. This morning we reported a net loss of $21.5 million for the fourth quarter of 2018 compared to net income of $26.2 million in the fourth quarter of 2017. The net loss amount includes a record $18.5 million of catastrophe and storm losses in the Reinsurance segment, which was partially offset by a $10 million underwriting gain in the Property and Casualty Insurance segment.

In addition, the net loss amount includes a $28 million pre-tax decrease in unrealized investment gains on equity investments. The Company adopted updated accounting guidance at the beginning of 2018 that requires a change in unrealized gain/loss in equity investments to be recognized in net income, whereas previously this change was recognized in accumulated other comprehensive income.

Also contributing to the net loss is $13.1 million of pre-tax realized investment losses. These losses were recognized to take advantage of a 14% tax differential that could be realized by carrying them back to a previous tax year subject to the prior 35% tax rate. This