Exhibit

DES MOINES, Iowa (February 7, 2019) - EMC Insurance Group Inc. (Nasdaq:EMCI) (the “Company”), today reported a net loss of $21.5 million ($1.00 per share) for the fourth quarter ended December 31, 2018, compared to net income of $26.2 million ($1.23 per share) for the fourth quarter ended December 31, 2017. The net loss amount reported for the fourth quarter of 2018 includes a record $18.5 million ($0.68 per share after tax) of catastrophe and storm losses in the reinsurance segment, compared to $1.9 million ($0.06 per share after tax) of total catastrophe and storm losses incurred in the fourth quarter of 2017. The Company reported a net loss of $7.5 million ($0.35 per share) for the year ended December 31, 2018 compared to net income of $39.2 million ($1.84 per share) for the same period in 2017. Included in the net income amounts reported for the fourth quarter and year ended December 31, 2017 is a one-time $9.1 million deferred income tax benefit that resulted from the enactment of the Tax Cuts and Jobs Act (TCJA) in December of 2017.

As required by updated accounting guidance adopted by the Company on January 1, 2018, the net loss amounts reported for the fourth quarter and year ended December 31, 2018 include pre-tax decreases of $28.0 million and $28.8 million, respectively, in unrealized investment gains on the Company’s equity investments stemming from the decline in equity markets that occurred in December. Also contributing to the net loss amounts reported for the fourth quarter and year ended December 31, 2018 are $13.1 million and $12.4 million, respectively, of pre-tax realized investment losses. Included in these amounts is $11.9 million of losses recognized on its fixed maturity portfolio in the fourth quarter to realize an incremental 14 percent tax benefit by carrying these losses back to a prior tax year subject to the previous 35 percent

Non-GAAP operating income, which excludes net realized investment gains/losses and, beginning in 2018, the change in net unrealized investment gains on equity investments from net income/loss, totaled $9.3 million ($0.43 per share) and $23.4 million ($1.09 per share) for the fourth quarter and year ended December 31, 2018. Non-GAAP operating income totaled $14.3 million ($0.67 per share) and $25.9 million ($1.22 per share) for the fourth quarter and year ended December 31, 2017. The 2017 amounts also exclude the deferred income tax benefit that resulted from the enactment of the TCJA in the fourth quarter of 2017, due to the one-time nature of this event.

On January 1, 2018, the Company adopted updated accounting guidance issued by the Financial Accounting Standards Board (FASB) which prohibits including components of net periodic pension and postretirement benefit costs/income, other than the service cost component, in any capitalized asset. In conjunction with the adoption of this updated guidance, management elected to report all components of net periodic pension and postretirement benefit income, other than the service cost component, as other income in the consolidated statements of income. The service cost component continues to be reported in other underwriting expenses. This change in reporting was applied retrospectively for comparison purposes and did not impact the net income or non-GAAP operating income amounts reported for the fourth quarters and years ended December 31, 2018 and 2017, as other income and other underwriting expenses increased by the same amounts; however, it did increase the acquisition expense ratios, and therefore the combined ratios, by 1.1 and 1.2 percentage points for the fourth quarter and year ended December 31, 2018, respectively, and 0.8 and 0.9 percentage points for the fourth quarter and year ended December 31, 2017, respectively.

Premiums earned increased 6.4 percent and 6.3 percent for the fourth quarter and year ended December 31, 2018, respectively. In the property and casualty insurance segment, premiums earned increased 5.8 percent and 4.9 percent for the fourth quarter and year ended December 31, 2018, respectively. These increases reflect small rate level increases on renewal business, an increase in retained policies in the commercial lines of business, and new business in commercial lines of business. In the reinsurance segment, premiums earned increased 8.6 percent and 11.1 percent for the fourth quarter and year ended December 31, 2018, respectively. These increases are attributed to increases in participation and higher estimated premiums achieved on existing multi-line contracts and a specialty casualty contract, and the addition of some new excess of loss business. These increases were partially offset by a continued decline in premiums reported by Mutual Re (formerly known as Mutual Reinsurance Bureau underwriting association) due to its withdrawal from non-standard automobile business.

Catastrophe and storm losses totaled $18.5 million ($0.68 per share after tax) in the fourth quarter of 2018, which were all attributable to the reinsurance segment. Included in this amount are losses of $6.3 million and $2.5 million, respectively, from the Camp and Woolsey wildfires in California, $3.0 million from Hurricane Michael and $2.5 million from Typhoon Jebi. The property and casualty insurance segment incurred approximately $2.1 million of catastrophe and storm losses in the fourth quarter of 2018. However, having filled the retention amounts under both semi-annual aggregate excess of loss treaties during the third quarter, all catastrophe and storm losses incurred during the fourth quarter were ceded to EMC Insurance Group Inc’s parent company, Employers Mutual Casualty Company (Employers Mutual). This brought the total amount of catastrophe and storm losses ceded to Employers Mutual by the property and casualty insurance segment to $4.4 million for the year ended December 31, 2018, compared to $18.1 million for the year ended December 31, 2017.

Catastrophe and storm losses totaled $1.9 million ($0.06 per share after tax) in the fourth quarter of 2017. In the property and casualty insurance segment, reductions in the estimates of catastrophe and storm losses that occurred during the first nine months of 2017 more than offset the catastrophe and storm losses incurred during the fourth quarter of 2017. This resulted in negative catastrophe and storm losses of $335,000. In the reinsurance segment, gross catastrophe and storm losses totaled $10.2 million in the fourth quarter of 2017. Having already filled the retention amount under the intercompany annual aggregate catastrophe excess of loss treaty with Employers Mutual, which had a retention of $20 million, a limit of $100 million, and a 20 percent co-participation, the reinsurance segment recovered $8.0 million from Employers Mutual under this program in the fourth quarter of 2017, bringing total recoveries to $16.9 million for 2017. Taking the loss recoveries received and the premiums paid to Employers Mutual into consideration, the intercompany reinsurance program reduced the reinsurance segment’s loss and settlement expense ratios by 19.2 and 9.0 percentage points for the fourth quarter and year ended December 31, 2017, respectively.

For the year ended December 31, 2018, catastrophe and storm losses totaled $60.9 million ($2.23 per share after tax), compared to $59.8 million ($1.82 per share after tax) for the same period in 2017. On a segment basis, catastrophe and storm losses totaled $37.0 million ($1.35 per share after tax) in the property and casualty insurance segment, and $23.9 million ($0.88 per share after tax) in the reinsurance segment for the year ended December 31, 2018, respectively. Only catastrophic events with total losses greater than $500,000 are subject to the terms of the reinsurance subsidiary’s annual aggregate treaty. Of the $23.9 million of catastrophe and storm losses incurred by the reinsurance segment in 2018, only $18.5 million of losses were subject to the terms of the treaty. Since this was less than the $20 million retention amount, no recoveries were made under this treaty in 2018. The reinsurance subsidiary did recover $5.2 million under the Industry Loss Warranties purchased in 2017 to provide additional protection in peak exposure territories. In accordance with the co-participation provision of the intercompany reinsurance program, the reinsurance subsidiary retained 20 percent of this recovery, with the remaining 80 percent ceded to Employers Mutual.

The Company reported $6.7 million ($0.24 per share after tax) and $18.7 million ($0.68 per share after tax) of favorable development on prior years’ reserves during the fourth quarter and year ended December 31, 2018, respectively, compared to $2.0 million ($0.06 per share after tax) and $19.6 million ($0.60 per share after tax) for the same periods in 2017. In the property and casualty insurance segment, favorable development totaled $2.8 million and $15.3 million for the fourth quarter and year ended December 31, 2018, compared to $180,000 and $15.7 million for the same periods in 2017. Included in the development amounts reported for the fourth quarter and year ended December 31, 2018 is $1.5 million of adverse development due to the strengthening of asbestos reserves. Included in the development amount reported for the year ended December 31, 2017 is $4.5 million of adverse development in the property and casualty insurance segment stemming from the settlement of claims for past and future legal fees and losses on a multi-year asbestos exposure associated with a former insured. The majority of the favorable development experienced in the fourth quarter of 2018 was attributable to reductions in the ultimate loss and settlement expense ratios for accident year 2017 in commercial property, and accident years 2013 and 2017 in commercial liability. This was partially offset

by adverse development from commercial auto liability, where ultimate loss and settlement expense ratios for accident years 2015-2017 were increased due to higher expected ultimate claim severity. In the reinsurance segment, favorable development totaled $3.9 million and $3.4 million for the fourth quarter and year ended December 31, 2018 attributable to the 2017 accident year in the property excess of loss line of business, partially offset by unfavorable development attributable to the 2015 and 2016 accident years in the other liability line of business, compared to favorable development of $1.8 million and $3.9 million for the same periods in 2017.

The pre-tax realized investment losses of $13.1 million and $12.4 million reported for the fourth quarter and year ended December 31, 2018 include pre-tax realized investment losses of $1.0 million and $2.7 million, respectively, generated from changes in the carrying value of a limited partnership that helps protect the Company from a sudden and significant decline in the value of its equity portfolio (the equity tail-risk hedging strategy). Pre-tax realized investment gains of $4.4 million and $6.6 million for the fourth quarter and year ended December 31, 2017 include $1.7 million and $6.3 million, respectively, of pre-tax realized investment losses attributed to a decline in the carrying value of this limited partnership.

Other income totaled $2.4 million and $9.2 million for the fourth quarter and year ended December 31, 2018, respectively, and includes $1.9 million and $7.5 million of net periodic pension and postretirement benefit income, and $248,000 and $637,000 of foreign currency exchange gains. For the fourth quarter and year ended December 31, 2017, other income totaled $1.8 million and $4.8 million, respectively, and includes $1.3 million and $5.1 million of net periodic pension and postretirement benefit income, and $123,000 and $1.6 million of foreign currency exchange losses.

EMC Insurance Group Inc. is a publicly held insurance holding company with operations in property and casualty insurance and reinsurance, which was formed in 1974 and became publicly held in 1982. The Company’s common stock trades on the Global Select Market tier of the Nasdaq Stock Market under the symbol EMCI. Additional information regarding the Company may be found at investors.emcins.com. EMCI’s parent company is Employers Mutual. EMCI and Employers Mutual, together with their subsidiary and affiliated companies, conduct operations under the trade name EMC Insurance Companies.

The Private Securities Litigation Reform Act of 1995 provides issuers the opportunity to make cautionary statements regarding forward-looking statements. Accordingly, any forward-looking statement contained in this report is based on management’s current beliefs, assumptions and expectations of the Company’s future performance, taking all information currently available into account. These beliefs, assumptions and expectations can change as the result of many possible events or factors, not all of which are known to management. If a change occurs, the Company’s business, financial condition, liquidity, results of operations, plans and objectives may vary materially from those expressed in the forward-looking statements.

Management intends to identify forward-looking statements when using the words “believe”, “expect”, “anticipate”, “estimate”, “project”, “may”, “intend”, “likely” or similar expressions. Undue reliance should not be placed on these forward-looking statements. The Company disclaims any obligation to update such statements or to announce publicly the results of any revisions that it may make to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

are not required to be disclosed in the notes to financial statements or, in some cases, include or exclude certain items not ordinarily included or excluded in the most comparable GAAP financial measure. The Company’s calculation of non-GAAP financial measures may differ from similar measures used by other companies, so investors should exercise caution when comparing the Company’s non-GAAP financial measures to the measures used by other companies. The following discussion includes reconciliations of the most directly comparable GAAP financial measures to the non-GAAP financial measures referenced in this report.

Non-GAAP operating income: One of the primary non-GAAP financial measures utilized by management for evaluating the Company’s performance is operating income. Non-GAAP operating income is calculated by excluding net realized investment gains/losses and, beginning in 2018, the change in net unrealized investment gains/losses on equity investments from net income/loss. While realized investment gains/losses are integral to the Company’s insurance operations over the long term, the decision to realize investment gains or losses in any particular period is subject to changing market conditions and management’s discretion, and is independent of the Company’s insurance operations. Prior to 2018, investments in equity investments were classified as available-for-sale and changes in unrealized investment gains/losses on equity investments were recognized in other comprehensive income. Effective January 1, 2018, the Company adopted the updated financial instruments guidance issued by the FASB, which requires changes in the unrealized investment gains/losses on equity investments to be recognized in net income/loss rather than other comprehensive income. Changes in unrealized investment gains/losses on equity investments are not predictable due to changing market conditions and are therefore also excluded from the calculation of non-GAAP operating income.



RECONCILIATION OF NET INCOME/LOSS TO NON-GAAP OPERATING INCOME
($ in thousands)
	Three months ended December 31,						Year ended December 31,
	2018			2017			2018			2017
Net income (loss)	$	(21,545	)	$	26,184		$	(7,468	)	$	39,238
Realized investment (gains) losses	13,095			(4,390		)	12,414			(6,556		)
Change in unrealized investment gains on equity investments	28,039			XXXX			28,838			XXXX
Income tax expense (benefit)	(10,328		)	1,537			(10,353		)	2,295
Net realized investment (gains) losses and, beginning in 2018, change in net unrealized investment gains on equity investments	30,806			(2,853		)	30,899			(4,261		)
Impact of TCJA at enactment	—			(9,057		)	—			(9,057		)
Non-GAAP operating income	$	9,261		$	14,274		$	23,431		$	25,920



RECONCILIATION OF NET INCOME/LOSS PER SHARE TO NON-GAAP OPERATING INCOME PER SHARE
	Three months ended December 31,						Year ended December 31,
	2018			2017			2018			2017
Net income (loss)	$	(1.00	)	$	1.23		$	(0.35	)	$	1.84
Realized investment (gains) losses	0.61			(0.21		)	0.58			(0.31		)
Change in unrealized investment gains on equity investments	1.30			XXXX			1.34			XXXX
Income tax expense (benefit)	(0.48		)	0.07			(0.48		)	0.11
Net realized investment (gains) losses and, beginning in 2018, change in net unrealized investment gains on equity investments	1.43			(0.14		)	1.44			(0.20		)
Impact of TCJA at enactment	—			(0.42		)	—			(0.42		)
Non-GAAP operating income	$	0.43		$	0.67		$	1.09		$	1.22

Property and casualty insurance segment’s underlying loss and settlement expense ratio: The loss and settlement expense ratio is the ratio (expressed as a percentage) of losses and settlement expenses incurred to premiums earned, which management uses as a measure of underwriting profitability of the Company’s property and casualty insurance business. The underlying loss and settlement expense ratio is a non-GAAP financial measure which represents the loss and settlement expense ratio, excluding the impact of catastrophe and storm losses and development on prior years’ reserves. Management uses this ratio as an indicator of the property and casualty insurance segment’s underwriting discipline and performance for the current accident year. Management believes this ratio is useful for investors to understand the property and casualty insurance segment’s periodic earnings and variability of earnings caused by the unpredictable nature (i.e., the timing and amount) of catastrophe and storm losses and development on prior years’ reserves. While this measure is consistent with measures utilized by investors and analysts to evaluate performance, it is not intended as a substitute for the GAAP financial measure of loss and settlement expense ratio.

Premiums written: Premiums written is an industry metric used in statutory accounting to quantify the amount of insurance sold during a specified reporting period. Management analyzes trends in premiums written to assess business efforts, and uses it as a financial measure for goal setting and determining a portion of employee and senior management awards and compensation. Premiums earned, used in both statutory and GAAP accounting, is the recognition of the portion of premiums written directly related to the expired portion of an insurance policy for a given reporting period. The unexpired portion of premiums written is referred to as unearned premiums, and represents the portion of premiums written that would be returned to a policyholder upon cancellation of a policy.



CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED
($ in thousands, except share and per share amounts)
Quarter ended December 31, 2018	Property and Casualty Insurance			Reinsurance			Parent Company			Consolidated
Revenues:
Premiums earned	$	129,107		$	38,636		$	—		$	167,743
Investment income, net	8,998			3,522			17			12,537
Other income	2,114			326			—			2,440
	140,219			42,484			17			182,720
Losses and expenses:
Losses and settlement expenses	73,730			42,433			—			116,163
Dividends to policyholders	2,049			—			—			2,049
Amortization of deferred policy acquisition costs	22,215			8,084			—			30,299
Other underwriting expenses	21,111			1,483			—			22,594
Interest expense	171			—			—			171
Other expenses	443			—			737			1,180
	119,719			52,000			737			172,456
Operating income (loss) before income taxes	20,500			(9,516		)	(720		)	10,264
Net realized investment gains (losses) and change in unrealized investment gains on equity investments	(27,002		)	(14,143		)	11			(41,134		)
Loss before income taxes	(6,502		)	(23,659		)	(709		)	(30,870		)
Income tax benefit:
Current	1,266			(3,853		)	(117		)	(2,704		)
Deferred	(4,405		)	(2,195		)	(21		)	(6,621		)
	(3,139		)	(6,048		)	(138		)	(9,325		)
Net loss	$	(3,363	)	$	(17,611	)	$	(571	)	$	(21,545	)
Average shares outstanding										21,609,561
Per Share Data:
Net loss per share - basic and diluted	$	(0.15	)	$	(0.82	)	$	(0.03	)	$	(1.00	)
Catastrophe and storm losses (after tax)	$	—		$	0.68		$	—		$	0.68
Favorable development on prior years' reserves (after tax)	$	0.10		$	0.14		$	—		$	0.24
Dividends per share										$	0.23
Other Information of Interest:
Premiums written	$	106,268		$	40,906		$	—		$	147,174
Catastrophe and storm losses	$	—		$	18,496		$	—		$	18,496
Favorable development on prior years' reserves	$	(2,829	)	$	(3,859	)	$	—		$	(6,688	)
GAAP Ratios:
Loss and settlement expense ratio	57.1		%	109.8		%	—			69.3		%
Acquisition expense ratio	35.2		%	24.8		%	—			32.7		%
Combined ratio	92.3		%	134.6		%	—			102.0		%



CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except share and per share amounts)
Quarter ended December 31, 2017	Property and Casualty Insurance			Reinsurance			Parent Company			Consolidated
Revenues:
Premiums earned	$	122,062		$	35,582		$	—		$	157,644
Investment income, net	8,445			3,350			5			11,800
Other income (loss)¹	1,826			(62		)	—			1,764
	132,333			38,870			5			171,208
Losses and expenses:
Losses and settlement expenses	71,906			26,974			—			98,880
Dividends to policyholders	2,426			—			—			2,426
Amortization of deferred policy acquisition costs	20,548			7,588			—			28,136
Other underwriting expenses¹	19,117			1,235			—			20,352
Interest expense	84			—			—			84
Other expenses	548			—			585			1,133
	114,629			35,797			585			151,011
Operating income (loss) before income taxes	17,704			3,073			(580		)	20,197
Realized investment gains	1,863			2,527			—			4,390
Income (loss) before income taxes	19,567			5,600			(580		)	24,587
Income tax expense (benefit):
Current	4,823			1,438			(175		)	6,086
Deferred²	(4,171		)	(3,471		)	(41		)	(7,683		)
	652			(2,033		)	(216		)	(1,597		)
Net income (loss)	$	18,915		$	7,633		$	(364	)	$	26,184
Average shares outstanding										21,417,785
Per Share Data:
Net income (loss) per share - basic and diluted	$	0.88		$	0.36		$	(0.01	)	$	1.23
Catastrophe and storm losses (after tax)	$	(0.01	)	$	0.07		$	—		$	0.06
Favorable development on prior years' reserves (after tax)	$	—		$	0.06		$	—		$	0.06
Dividends per share										$	0.22
Other Information of Interest:
Premiums written	$	98,818		$	36,929		$	—		$	135,747
Catastrophe and storm losses	$	(335	)	$	2,234		$	—		$	1,899
Favorable development on prior years' reserves	$	(180	)	$	(1,822	)	$	—		$	(2,002	)
GAAP Ratios:
Loss and settlement expense ratio	58.9		%	75.8		%	—			62.7		%
Acquisition expense ratio¹	34.5		%	24.8		%	—			32.3		%
Combined ratio¹	93.4		%	100.6		%	—			95.0		%

¹Amounts for other income (loss), other underwriting expenses and the acquisition expense and combined ratios are restated for new accounting guidance for the reporting of retirement benefit expenses that became effective January 1, 2018.
²The amounts for 2017 reflect $9.1 million of deferred income tax benefit ($5.8 million for the property and casualty insurance segment, $3.2 million for the reinsurance segment, and $13,000 for the parent company) from the decline in the United States federal corporate tax rate from 35 percent to 21 percent that was enacted on December 22, 2017.



CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED
($ in thousands, except share and per share amounts)
Year ended December 31, 2018	Property and Casualty Insurance			Reinsurance			Parent Company			Consolidated
Revenues:
Premiums earned	$	495,447		$	149,736		$	—		$	645,183
Investment income, net	34,070			13,523			44			47,637
Other income	8,444			715			—			9,159
	537,961			163,974			44			701,979
Losses and expenses:
Losses and settlement expenses	332,921			124,238			—			457,159
Dividends to policyholders	9,209			—			—			9,209
Amortization of deferred policy acquisition costs	83,869			31,934			—			115,803
Other underwriting expenses	85,967			2,857			—			88,824
Interest expense	654			—			—			654
Other expenses	1,202			—			2,552			3,754
	513,822			159,029			2,552			675,403
Operating income (loss) before income taxes	24,139			4,945			(2,508		)	26,576
Net realized investment losses and change in unrealized investment gains on equity investments	(28,227		)	(12,935		)	(90		)	(41,252		)
Loss before income taxes	(4,088		)	(7,990		)	(2,598		)	(14,676		)
Income tax benefit:
Current	106			(821		)	(510		)	(1,225		)
Deferred	(3,882		)	(2,076		)	(25		)	(5,983		)
	(3,776		)	(2,897		)	(535		)	(7,208		)
Net loss	$	(312	)	$	(5,093	)	$	(2,063	)	$	(7,468	)
Average shares outstanding										21,549,436
Per Share Data:
Net loss per share - basic and diluted	$	(0.01	)	$	(0.24	)	$	(0.10	)	$	(0.35	)
Catastrophe and storm losses (after tax)	$	1.35		$	0.88		$	—		$	2.23
Favorable development on prior years' reserves (after tax)	$	0.56		$	0.12		$	—		$	0.68
Dividends per share										$	0.89
Book value per share										$	26.18
Effective tax rate										49.1		%
Net loss as a percent of beg. SH equity										(1.2		)%
Other Information of Interest:
Premiums written	$	510,525		$	150,518		$	—		$	661,043
Catastrophe and storm losses	$	37,000		$	23,870		$	—		$	60,870
Favorable development on prior years' reserves	$	(15,318	)	$	(3,366	)	$	—		$	(18,684	)
GAAP Ratios:
Loss and settlement expense ratio	67.2		%	83.0		%	—			70.9		%
Acquisition expense ratio	36.1		%	23.2		%	—			33.1		%
Combined ratio	103.3		%	106.2		%	—			104.0		%



CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except share and per share amounts)
Year ended December 31, 2017	Property and Casualty Insurance			Reinsurance			Parent Company			Consolidated
Revenues:
Premiums earned	$	472,369		$	134,789		$	—		$	607,158
Investment income, net	32,670			12,771			38			45,479
Other income (loss)¹	6,283			(1,519		)	—			4,764
	511,322			146,041			38			657,401
Losses and expenses:
Losses and settlement expenses	302,973			118,996			—			421,969
Dividends to policyholders	7,610			—			—			7,610
Amortization of deferred policy acquisition costs	79,734			29,176			—			108,910
Other underwriting expenses¹	79,245			2,673			—			81,918
Interest expense	337			—			—			337
Other expenses	1,128			—			2,269			3,397
	471,027			150,845			2,269			624,141
Operating income (loss) before income taxes	40,295			(4,804		)	(2,231		)	33,260
Realized investment gains	4,896			1,660			—			6,556
Income (loss) before income taxes	45,191			(3,144		)	(2,231		)	39,816
Income tax expense (benefit):
Current	10,388			(1,606		)	(778		)	8,004
Deferred²	(2,963		)	(4,447		)	(16		)	(7,426		)
	7,425			(6,053		)	(794		)	578
Net income (loss)	$	37,766		$	2,909		$	(1,437	)	$	39,238
Average shares outstanding										21,326,358
Per Share Data:
Net income (loss) per share - basic and diluted	$	1.77		$	0.14		$	(0.07	)	$	1.84
Catastrophe and storm losses (after tax)	$	0.90		$	0.92		$	—		$	1.82
Favorable development on prior years' reserves (after tax)	$	0.48		$	0.12		$	—		$	0.60
Dividends per share										$	0.85
Book value per share										$	28.14
Effective tax rate										1.5		%
Net income as a percent of beg. SH equity										7.1		%
Other Information of Interest:
Premiums written	$	484,027		$	132,274		$	—		$	616,301
Catastrophe and storm losses	$	29,587		$	30,230		$	—		$	59,817
Favorable development on prior years' reserves	$	(15,735	)	$	(3,884	)	$	—		$	(19,619	)
GAAP Ratios:
Loss and settlement expense ratio	64.1		%	88.3		%	—			69.5		%
Acquisition expense ratio¹	35.3		%	23.6		%	—			32.7		%
Combined ratio¹	99.4		%	111.9		%	—			102.2		%

¹Amounts for other income (loss), other underwriting expenses and the acquisition expense and combined ratios are restated for new accounting guidance for the reporting of retirement benefit expenses that became effective January 1, 2018.
²The amounts for 2017 reflect $9.1 million of deferred income tax benefit ($5.8 million for the property and casualty insurance segment, $3.2 million for the reinsurance segment, and $13,000 for the parent company) from the decline in the United States federal corporate tax rate from 35 percent to 21 percent that was enacted on December 22, 2017.



CONSOLIDATED BALANCE SHEETS
	December 31, 2018		December 31, 2017
($ in thousands, except share and per share amounts)	(Unaudited)
ASSETS
Investments:
Fixed maturity securities available-for-sale, at fair value (amortized cost $1,273,132 and $1,253,166)	$	1,282,909	$	1,275,016
Equity investments, at fair value (cost $160,371 and $144,274)	215,363		228,115
Equity investments, at alternative measurement of cost less impairments	1,200		—
Other long-term investments	19,316		13,648
Short-term investments	28,204		23,613
Total investments	1,546,992		1,540,392

Cash	337		347
Reinsurance receivables due from affiliate	37,361		31,650
Prepaid reinsurance premiums due from affiliate	8,789		12,789
Deferred policy acquisition costs (affiliated $44,440 and $40,848)	44,760		41,114
Amounts due from affiliate to settle inter-company transaction balances	5,154		—
Prepaid pension and postretirement benefits due from affiliate	17,691		20,683
Accrued investment income	10,468		11,286
Amounts receivable under reverse repurchase agreements	—		16,500
Accounts receivable	1,658		1,604
Income taxes recoverable	6,697		—
Goodwill	942		942
Other assets (affiliated $4,510 and $4,423)	4,629		4,633
Total assets	$	1,685,478	$	1,681,940

LIABILITIES
Losses and settlement expenses (affiliated $771,872 and $726,413)	$	777,190	$	732,612
Unearned premiums (affiliated $267,064 and $256,434)	268,511		257,797
Other policyholders' funds (all affiliated)	8,807		10,013
Surplus notes payable to affiliate	25,000		25,000
Amounts due affiliate to settle inter-company transaction balances	—		367
Pension benefits payable to affiliate	4,070		4,185
Income taxes payable	—		544
Deferred income taxes	4,908		15,020
Other liabilities (affiliated $31,121 and $27,520)	31,210		32,556
Total liabilities	1,119,696		1,078,094

STOCKHOLDERS' EQUITY
Common stock, $1 par value, authorized 30,000,000 shares; issued and outstanding, 21,615,105 shares in 2018 and 21,455,545 shares in 2017	21,615		21,455
Additional paid-in capital	128,451		124,556
Accumulated other comprehensive income	1,620		83,384
Retained earnings	414,096		374,451
Total stockholders' equity	565,782		603,846
Total liabilities and stockholders' equity	$	1,685,478	$	1,681,940



LOSS AND SETTLEMENT EXPENSE BY LINE OF BUSINESS

	Three months ended December 31,
	2018						2017
($ in thousands)	Premiums earned		Losses and settlement expenses		Loss and settlement expense ratio		Premiums earned		Losses and settlement expenses		Loss and settlement expense ratio
Property and casualty insurance
Commercial lines:
Automobile	$	33,341	$	30,317	90.9	%	$	30,949	$	25,989	84.0	%
Property	29,466		2,159		7.3	%	28,611		8,347		29.2	%
Workers' compensation	25,319		18,435		72.8	%	25,133		15,881		63.2	%
Other liability	28,448		17,564		61.7	%	25,296		15,188		60.0	%
Other	2,474		807		32.6	%	2,210		878		39.7	%
Total commercial lines	119,048		69,282		58.2	%	112,199		66,283		59.1	%

Personal lines	10,059		4,448		44.2	%	9,863		5,623		57.0	%
Total property and casualty insurance	$	129,107	$	73,730	57.1	%	$	122,062	$	71,906	58.9	%

Reinsurance
Pro rata reinsurance	$	10,983	$	9,106	82.9	%	$	11,455	$	5,883	51.4	%
Excess of loss reinsurance	27,653		33,327		120.5	%	24,127		21,091		87.4	%
Total reinsurance	$	38,636	$	42,433	109.8	%	$	35,582	$	26,974	75.8	%

Consolidated	$	167,743	$	116,163	69.3	%	$	157,644	$	98,880	62.7	%

	Year ended December 31,
	2018						2017
($ in thousands)	Premiums earned		Losses and settlement expenses		Loss and settlement expense ratio		Premiums earned		Losses and settlement expenses		Loss and settlement expense ratio
Property and casualty insurance
Commercial lines:
Automobile	$	128,496	$	106,266	82.7	%	$	118,224	$	100,915	85.4	%
Property	108,525		59,634		54.9	%	108,162		59,638		55.1	%
Workers' compensation	99,699		70,410		70.6	%	100,552		57,332		57.0	%
Other liability	110,400		67,061		60.7	%	98,674		56,021		56.8	%
Other	9,256		412		4.4	%	8,719		1,655		19.0	%
Total commercial lines	456,376		303,783		66.6	%	434,331		275,561		63.4	%

Personal lines	39,071		29,138		74.6	%	38,038		27,412		72.1	%
Total property and casualty insurance	$	495,447	$	332,921	67.2	%	$	472,369	$	302,973	64.1	%

Reinsurance
Pro rata reinsurance	$	44,610	$	27,281	61.2	%	$	44,636	$	29,862	66.9	%
Excess of loss reinsurance	105,126		96,957		92.2	%	90,153		89,134		98.9	%
Total reinsurance	$	149,736	$	124,238	83.0	%	$	134,789	$	118,996	88.3	%

Consolidated	$	645,183	$	457,159	70.9	%	$	607,158	$	421,969	69.5	%



PREMIUMS WRITTEN
	Three months ended December 31, 2018				Three months ended December 31, 2017
($ in thousands)	Premiums written		Percent of premiums written		Premiums written		Percent of premiums written		Change in premiums written
Property and casualty insurance
Commercial lines:
Automobile	$	28,063	19.1	%	$	26,210	19.3	%	7.1%
Property	25,674		17.4	%	22,386		16.5	%	14.7%
Workers' compensation	19,260		13.1	%	18,278		13.4	%	5.4%
Other liability	22,318		15.1	%	20,634		15.2	%	8.2%
Other	2,014		1.4	%	1,739		1.3	%	15.8%
Total commercial lines	97,329		66.1	%	89,247		65.7	%	9.1%

Personal lines	8,939		6.1	%	9,571		7.1	%	(6.6)%
Total property and casualty insurance	$	106,268	72.2	%	$	98,818	72.8	%	7.5%

Reinsurance
Pro rata reinsurance	$	12,004	8.2	%	$	12,107	8.9	%	(0.9)%
Excess of loss reinsurance	28,902		19.6	%	24,822		18.3	%	16.4%
Total reinsurance	$	40,906	27.8	%	$	36,929	27.2	%	10.8%

Consolidated	$	147,174	100.0	%	$	135,747	100.0	%	8.4%

	Year ended December 31, 2018				Year ended December 31, 2017
($ in thousands)	Premiums written		Percent of premiums written		Premiums written		Percent of premiums written		Change in premiums written
Property and casualty insurance
Commercial lines:
Automobile	$	132,684	20.1	%	$	123,969	20.0	%	7.0%
Property	122,526		18.5	%	110,211		17.9	%	11.2%
Workers' compensation	99,506		15.0	%	101,303		16.4	%	(1.8)%
Other liability	107,017		16.2	%	100,851		16.4	%	6.1%
Other	9,588		1.5	%	8,965		1.5	%	7.0%
Total commercial lines	471,321		71.3	%	445,299		72.2	%	5.8%

Personal lines	39,204		5.9	%	38,728		6.3	%	1.2%
Total property and casualty insurance	$	510,525	77.2	%	$	484,027	78.5	%	5.5%

Reinsurance
Pro rata reinsurance	$	44,648	6.8	%	$	42,203	6.9	%	5.8%
Excess of loss reinsurance	105,870		16.0	%	90,071		14.6	%	17.5%
Total reinsurance	$	150,518	22.8	%	$	132,274	21.5	%	13.8%

Consolidated	$	661,043	100.0	%	$	616,301	100.0	%	7.3%


•	catastrophic events and the occurrence of significant severe weather conditions;


•	changes in the property and casualty insurance industry, interest rates or the performance of financial markets and the general economy;


•	“other-than-temporary” investment impairment losses; and


•	other risks and uncertainties inherent to the Company’s business, including those discussed under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K.



RECONCILIATION OF THE PROPERTY AND CASUALTY INSURANCE SEGMENT'S LOSS AND SETTLEMENT EXPENSE RATIO TO THE UNDERLYING LOSS AND SETTLEMENT EXPENSE RATIO
	Three months ended December 31,				Year ended December 31,
	2018		2017		2018		2017
Loss and settlement expense ratio	57.1	%	58.9	%	67.2	%	64.1	%
Catastrophe and storm losses	—	%	0.3	%	(7.5	)%	(6.3	)%
Favorable development on prior years' reserves	2.2	%	0.1	%	3.1	%	3.3	%
Underlying loss and settlement expense ratio	59.3	%	59.3	%	62.8	%	61.1	%


•	rating agency actions;