EMC Insurance Group Inc.
) has disclosed its preliminary estimates for second-quarter 2014.
The property and casualty insurer expects to incur operating loss
of 2 cents per share due to higher level of catastrophe (CAT). This
compares unfavorably with 47 cents per share earned in the year ago
The Zacks Consensus Estimate is currently pegged at 23 cents per
share. We expect the estimate to trend lower as analysts take into
account the effect of higher losses.
Increased CAT losses in the quarter largely stemmed from hail, wind
and tornado damage from several severe Midwest storms. Catastrophic
and storm losses in the quarter are expected to increase 27.3% year
over year to $1.35 per share. Consequently, the combined ratio is
expected to deteriorate 740 basis points to 109.6 in the second
quarter of 2014.
Segment-wise, the property and casualty segment is expected to
experience CAT and storm loss of $21.5 million or $1.04 per share,
while the reinsurance segment will incur a CAT and storm loss of
$6.5 million or 31 cents per share. In the year-ago quarter, the
property and casualty segment reported CAT and storm loss of $18.5
million while the reinsurance segment reported a loss of $2.9
Apart from these, EMC Insurance's losses are expected to increase
52% year over year to $9.9 million or 48 cents per share in
EMC Insurance stated that it continues to implement modest rate
increase in the property and casualty insurance segment. However,
it noted that the rate was declining in the reinsurance segment due
to excess capital in the industry.
Based on its year-to-date performance, EMC Insurance slashed its
2014 earnings expectation. It now expects operating income in the
range of $2.00-$2.25 from $2.65-$2.90 per share guided earlier. The
guidance also compares unfavorably with operating income of 2.88
per share earned in 2013.
The Zacks Consensus Estimate for 2014 is currently pegged at
$2.70 per share. We expect the figure to be revised downward as
analysts incorporate the EMC Insurance's guidance in their
The 2014 guidance includes a mid single-digit increase in
investment income, comparing favorably with a decline of 1% in
2013. GAAP combined ratio for 2014 is expected to be 101.0%, a
deterioration from 97.9% in 2013.
EMC Insurance Group is scheduled to report second-quarter 2014
earnings on Aug 7. With respect to earnings performance, EMC
Insurance delivered positive earnings surprises in two of the last
four quarters with trailing four-quarter average surprise of 118%.
The company missed earnings estimates in the last reported quarter.
There was no earnings momentum over the last 60 days. With the news
of company expecting to incur loss in to be reported quarter and
lowering guidance, we expect analysts to lower their estimates,
hence putting downward pressure on Zacks Rank.
EMC Insurance Group currently has a Zacks Rank #3 (Hold).
Better-ranked property and casualty insurers include
Greenlight Capital Re, Ltd.
AmTrust Financial Services, Inc.
Endurance Specialty Holdings Ltd.
). All of these stocks sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
EMC INSURANCE (EMCI): Free Stock Analysis
GREENLIGHT CAP (GLRE): Free Stock Analysis
AMTRUST FIN SVC (AFSI): Free Stock Analysis
ENDURANCE SPLTY (ENH): Free Stock Analysis
To read this article on Zacks.com click here.