EMC Insurance Provides Year-End 2012 Combined Ratio, Operating Income Outlook

EMC Insurance Group Inc.

(the “Company”) today announced that it expects to report that the GAAP combined ratio for the year ended December 31, 2012 will be approximately 99.6 percent and that operating income^1 will be approximately $2.54 per share. These results are significantly better than the Company's most recent guidance, which anticipated a GAAP combined ratio of 101.3 percent and operating income of $2.05 to $2.30 per share. “Both our property and casualty insurance segment and our reinsurance segment experienced strong operating results during the fourth quarter,” stated Bruce G. Kelley, President and Chief Executive Officer. “The fourth quarter was relatively quiet, in part because Superstorm Sandy was not a significant event for us. We continued to benefit from the improving rate environment, and experienced a decline in both claims frequency and severity.” Premium income is expected to have increased approximately 10.2 percent for the year ended December 31, 2012. The property and casualty insurance segment is expected to report an increase of approximately 11.0 percent, with the majority of the increase attributed to rate level increases, growth in insured exposures and an increase in retained policies. The reinsurance segment is expected to report an increase of approximately 7.3 percent, which is down from the 16.5 percent increase reported at the end of the third quarter. This decrease is primarily attributed to a significant decline in the year-end estimate of “earned but not reported” premiums on several pro rata accounts, including the new offshore energy and liability account. Catastrophe and storm losses are expected to have totaled approximately $53,460,000 ($2.70 per share after tax) compared to an unprecedented $80,331,000 ($4.04 per share after tax) in 2011. Losses associated with Superstorm Sandy were capped at $4,000,000 in the reinsurance segment and totaled only $907,000 in the property and casualty insurance segment. On a per share basis, the losses associated with Superstorm Sandy amounted to approximately $0.25 after tax. Investment income for the year ended December 31, 2012, is expected to have decreased approximately 4.3 percent to $44,145,000 from $46,111,000 in 2011. This decrease is primarily attributed to the low interest rate environment that has persisted for the past several years. The Company's 2012 fourth quarter and year-end earnings results will be released before the market opens on February 20, 2013. An earnings call will be held at 11:00 a.m. eastern standard time on that date to allow securities analysts, stockholders and other interested parties the opportunity to hear management discuss the Company's 2012 fourth quarter and year-end earnings results, as well as its expectations for 2013.