Iowa-based EMC Insurance Group Inc. announced that losses associated with Hurricane Rita are expected to total approximately $4.7 million, or $0.23 per share after tax.
Losses in the property and casualty insurance segment are expected to be approximately $3.2 million and losses in the reinsurance segment will be capped at the $1.5 million occurrence limit. No reinstatement premiums will be incurred under the property and casualty insurance segment’s catastrophe reinsurance program because the contract provides for only one automatic reinstatement of coverage, which occurred after Hurricane Katrina.
In addition, management has determined that no additional catastrophe reinsurance protection is needed at this time. No reinstatement premium income is expected to be received by the reinsurance segment as a result of Hurricane Rita because the reinsurance contracts provide for only one automatic reinstatement of coverage, and the contracts affected by Hurricane Rita are likely the same ones that were reinstated after Hurricane Katrina.
Losses associated with Hurricane Katrina are now estimated to be $4.3 million, or $0.20 per share after tax. The company had previously estimated that losses from Hurricane Katrina would range from $0.28 per share to $0.32 per share; however, the original loss estimate has been revised downward slightly and it has been determined that the reinsurance segment will receive approximately $1.4 million in reinstatement premiums from its ceding companies in connection with the one-time automatic reinstatement of coverage. This reinstatement income reduces the estimated cost of Hurricane Katrina by approximately $0.06 per share.
The company also experienced unusual Midwest hailstorms in September. Losses from these storms are estimated to be $1.6 million, or $0.08 per share after tax.
As a result of the significant hurricane losses and the Midwest hailstorms experienced during the third quarter, management is lowering its annual earnings guidance for calendar year 2005. Operating income for calendar year 2005 is now estimated to be in the range of $1.95 per share to $2.10 per share. Previous guidance for 2005 operating income was $2.15 per share to $2.40 per share.
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