EMC Insurance Group Inc.:

EMC Insurance Group Inc. (Nasdaq:EMCI) today reported operating income of $0.42 per share for the fourth quarter ended December 31, 2008, compared to $0.39 per share for the fourth quarter of 2007¹. Operating income for the year ended December 31, 2008 was $1.05 per share, compared to $2.91 per share for the same period in 2007.

Net income, including realized investment gains/losses, was $474,000 ($0.04 per share) for the fourth quarter of 2008 compared to $7,058,000 ($0.51 per share) for the fourth quarter of 2007. Net loss for the year ended December 31, 2008 was $1,705,000 ($0.13 per share), compared to net income of $42,478,000 ($3.09 per share) for the same period in 2007.

“Operating income for 2008 was negatively impacted by a record amount of catastrophe and storm losses,” stated President and CEO Bruce G. Kelley. “This record amount of catastrophe and storm losses added 13.0 percentage points to our 2008 combined ratio, compared to an average over the last decade of 5.4 percentage points. Excluding the excess catastrophe and storm losses experienced during 2008, the Company came very close to meeting its combined ratio target for the year,” continued Kelley. “Net income was further negatively impacted by a record amount of “other-than-temporary” investment impairment losses generated by the severe and prolonged turmoil in the financial markets. On the positive side, our loss and settlement expense reserves remain at a very adequate level and our financial condition continues to be very strong.”

Premiums earned decreased 0.9 percent to $101,313,000 for the three months ended December 31, 2008 from $102,240,000 for the same period in 2007. For the year ended December 31, 2008, premiums earned decreased 1.0 percent to $389,318,000 from $393,059,000 for the same period in 2007. On an overall basis, premium rate competition increased moderately in the property and casualty insurance marketplace during 2008, resulting in an approximate 4.8 percent reduction in premium rate levels. Market conditions began to stabilize toward the end of 2008 and premium rates could begin to firm somewhat during 2009 due to the large decline in capital experienced by the insurance industry in 2008.

Investment income decreased 3.0 percent to $12,213,000 for the fourth quarter and 0.2 percent to $48,403,000 for the year ended December 31, 2008 from $12,587,000 and $48,482,000 for the same periods in 2007.

The Company experienced $5,127,000 ($0.25 per share after tax) of favorable development on prior years’ reserves during the fourth quarter of 2008 compared to $266,000 ($0.01 per share after tax) of adverse development in the fourth quarter of 2007. For the year ended December 31, 2008, the Company had favorable development on prior years’ reserves totaling $35,308,000 ($1.70 per share after tax) compared to $38,738,000 ($1.83 per share after tax) for the same period in 2007.

“Carried loss and settlement expense reserves were in the upper quarter of the range of actuarial indications at December 31, 2008, which is similar to our position at year-end 2007,” stated Kelley. “While we expect to see favorable reserve development in the future, the amount could be lower than the unusually high levels experienced in recent years.”

Catastrophe and storm losses totaled $1,703,000 ($0.08 per share after tax) in the fourth quarter of 2008 compared to $2,040,000 ($0.10 per share after tax) in the fourth quarter of 2007. For the year ended December 31, 2008, catastrophe and storm losses totaled a record $50,774,000 ($2.44 per share after tax), compared to $21,514,000 ($1.02 per share after tax) for the same period in 2007. Included in the amount for the year ended December 31, 2008 is $9,670,000 ($0.46 per share after tax) of losses associated with the Parkersburg, Iowa tornado and $8,250,000 ($0.40 per share after tax) of losses associated with Hurricanes Gustav and Ike.

The Company’s GAAP combined ratio was 105.4 percent in the fourth quarter of 2008 compared to 105.2 percent in the fourth quarter of 2007. For the year ended December 31, 2008, the GAAP combined ratio was 108.3 percent compared to 97.6 percent for the same period in 2007.

“Other-than-temporary” investment impairment losses totaled a record $9,248,000 ($0.45 per share after tax) and $30,921,000 ($1.49 per share after tax) for the fourth quarter and year ended December 31, 2008. For comparative purposes, “other-than-temporary” investment impairment losses for the year ended December 31, 2007 totaled $1,277,000 ($0.06 per share after tax).

At December 31, 2008, consolidated assets totaled $1.1 billion, including $965.2 million in the investment portfolio; stockholders’ equity decreased 21.5 percent to $282.9 million; and net book value of the Company’s stock was $21.32 per share, a decrease of 18.5 percent from $26.15 per share at December 31, 2007.

Management is projecting that 2009 operating income will be within a range of $1.45 per share to $1.70 per share. This estimate is based on a projected GAAP combined ratio of 105.5 percent, which reflects the lagging affect of previous rate level reductions.

As of December 31, 2008, 565,563 shares of the Company’s common stock have been purchased under the Company’s $25 million stock repurchase program at a cost of approximately $14.3 million. Additional purchases have been made during 2009, bringing the total, as of February 23, 2009, to 590,515 shares at a cost of approximately $14.8 million. The timing and terms of the purchases are determined by management based on market conditions, and the transactions are conducted in accordance with the applicable rules of the SEC. Common stock purchased under this program is being retired by the Company. The Company’s parent organization, Employers Mutual Casualty Company, has a stock purchase program in place as well, with about $4.5 million of its $15 million authorization remaining. This program is currently dormant and will not be reactivated until the Company’s repurchase program is completed.

The Company will hold an earnings teleconference call at 11:00 a.m. eastern standard time on February 27, 2009 to allow securities analysts, shareholders and other interested parties the opportunity to hear management discuss the Company’s fourth quarter and year-end 2008 results, as well as its expectations for 2009. Dial-in information for the call is toll-free 1-877-407-8031 (International: 1-201-689-8031). The event will be archived and available for digital replay through March 12, 2009. The replay access information is toll-free 1-877-660-6853 (International: 1-201-612-7415); passcodes required for playback: account number 286, conference ID number 310361.

Members of the news media, investors and the general public are invited to access a live webcast of the conference call via http://www.InvestorCalendar.com or the Company’s investor relations page at www.emcinsurance.com. The webcast will be archived and available for replay until February 26, 2010. A transcript of the teleconference will also be available on the Company’s website shortly after the completion of the teleconference.

EMC Insurance Group Inc., the publicly-held insurance holding company of EMC Insurance Companies, owns subsidiaries with operations in property and casualty insurance and reinsurance. EMC Insurance Companies is one of the largest property and casualty entities in Iowa and among the top 60 insurance entities nationwide based on premium volume. For more information, visit our website www.emcinsurance.com.

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 into account all information currently available to management. 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. The risks and uncertainties that may affect the actual results of the Company include, but are not limited to the following: catastrophic events and the occurrence of significant severe weather conditions; the adequacy of loss and settlement expense reserves; state and federal legislation and regulations; changes in our industry, interest rates or the performance of financial markets and the general economy; rating agency actions 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 and the update contained in the Company’s September 30, 2008 Form 10-Q. Management intends to identify forward-looking statements when using the words “believe”, “expect”, “anticipate”, “estimate”, “project” or similar expressions. Undue reliance should not be placed on these forward-looking statements.

¹The Company uses a non-GAAP financial measure called “operating income” that management believes is useful to investors because it illustrates the performance of our normal, ongoing operations, which is important in understanding and evaluating our financial condition and results of operations. While this measure is consistent with measures utilized by investors to evaluate performance, it is not a substitute for the U.S. GAAP financial measure of net income. Therefore, the Company has provided the following reconciliation of this non-GAAP financial measure to the U.S. GAAP financial measure of net income. Management also uses non-GAAP financial measures for goal setting, determining employee and senior management awards and compensation, and evaluating performance.

The Company had total cash and invested assets with a carrying value of $965.3 million as of December 31, 2008 and $1.0 billion December 31, 2007. The following table summarizes the Company's cash and invested assets as of the dates indicated:

Anita Novak (Investors)
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