($ in thousands) 1994 1993 1992 -------- -------- -------- Premiums earned ............................ $ 12,161 $ 13,529 $ 11,656 Losses and settlement expenses ............. 8,507 12,706 10,727 Other expenses ............................. 3,160 3,366 2,922 -------- -------- -------- Underwriting gain (loss) ................... 494 (2,543) (1,993) Net investment income ...................... 1,152 1,166 1,179 Realized investment gains .................. 75 109 47 -------- -------- -------- Operating income (loss) before income taxes $ 1,721 $ (1,268) $ (767) ======== ======== ======== Incurred losses and settlement expenses: Insured events of the current year ....... $ 9,870 $ 13,182 $ 10,108 (Decrease) increase in provision for insured events of prior years .......... (1,363) (476) 619 -------- -------- -------- Total losses and settlement expenses .... $ 8,507 $ 12,706 $ 10,727 ======== ======== ======== Catastrophe losses ......................... $ - $ - $ 329 ======== ======== ========
We have audited the accompanying consolidated balance sheets of EMC Insurance Group Inc. and Subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1994. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
Year ended December 31, ---------------------------------------- 1994 1993 1992 ------------ ------------ ------------ REVENUES: Premiums earned (notes 2 and 3) ... $164,829,379 $156,437,538 $147,410,287 Investment income, net (note 10) .. 20,929,680 20,779,951 21,539,597 Realized investment gains (note 10) 519,567 684,445 384,283 Other income (note 2) ............. 433,979 259,217 - ------------ ------------ ------------ 186,712,605 178,161,151 169,334,167 ------------ ------------ ------------ LOSSES AND EXPENSES: Losses and settlement expenses (notes 2,3 and 5) ...... 116,944,054 120,355,299 122,087,833 Dividends to policyholders ........ 3,103,788 2,494,284 3,382,736 Amortization of deferred policy acquisition costs ........ 31,701,789 30,717,175 29,291,362 Other underwriting expenses ....... 16,286,206 15,575,257 13,597,179 ------------ ------------ ------------ 168,035,837 169,142,015 168,359,110 ------------ ------------ ------------ Income before income taxes and cumulative effect of changes in accounting principles ....... 18,676,768 9,019,136 975,057 ------------ ------------ ------------ INCOME TAXES (note 11): Current ........................... 5,265,482 1,903,128 2,260,795 Deferred .......................... (94,441) (18,027) (1,501,430) ------------ ------------ ------------ 5,171,041 1,885,101 759,365 ------------ ------------ ------------ Income before cumulative effect of changes in accounting principles 13,505,727 7,134,035 215,692
Year ended December 31, ----------------------------------------- 1994 1993 1992 ------------- ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of fixed maturity securities held-to-maturity ..... $ (93,131,676) $ - $ - Maturities of fixed maturity securities held-to-maturity ..... 41,099,534 - - Purchases of fixed maturity securities available for sale ... (193,422,946) - - Maturities of fixed maturity securities available-for-sale ... 208,880,152 - - Sales of equity securities available-for-sale .............. 500,000 1,043,068 - Purchases of fixed maturity securities ...................... - (266,682,915)(316,878,492) Maturities of fixed maturity securities ...................... - 274,909,330 270,821,880 Net sales of short-term investments 699,964 1,420,288 797,191 Final settlement on sale of life subsidiary ...................... - - 474,356 ------------- ------------ ------------ Net cash (used in) provided by investing activities .. (35,374,972) 10,689,771 (44,785,065) ------------- ------------ ------------
Premiums are recognized as revenue ratably over the terms of the respective policies. Effective January 1, 1993, the property and casualty insurance subsidiaries changed their method of calculating unearned premiums from the monthly pro rata method to the daily pro rata method. The property and casualty insurance subsidiaries changed their accounting method because of management's belief that the new method provides for a more accurate matching of revenues and expenses over the terms of the underlying insurance policies. This change resulted in a cumulative increase in unearned premiums of $1,109,799 and a decrease in income of $807,933 ($.08 per share), net of income tax benefits of $301,866.