EMC Insurance Group Notes Discontinuance of Nonstandard Risk Auto Business

Iowa-based EMC Insurance Group Inc. announced that Farm and City Insurance Company, a wholly-owned subsidiary, will discontinue writing nonstandard risk automobile insurance business and institute non-renewal procedures on all existing business. The effective dates for these actions will be determined by the requirements of the six states in which is conducts business and the terms of the individual policies.

“Considerable study and evaluation was made before embarking on this course of action,” stated Bruce Kelley, president and CEO. “Farm and City is not a significant player in the nonstandard risk automobile insurance marketplace and has struggled with increasing competition from both the standard and the nonstandard markets. Management has determined that this line of business does not represent a core competency of our insurance business and therefore could not justify the substantial amount of resources that would be required to improve its operating performance.”

Discontinuing this line of business will not have a material impact on the operations of EMC Insurance Group Inc. Farm and City has been a participant in the EMC Insurance Companies’ pooling agreement since 1998 and will continue to participate in the pooling agreement even though it will no longer write any direct business.

As a result, the company’s cumulative pool participation percentage will remain at 23.5 percent. In 2003, Farm and City produced approximately $9.8 million of direct premium, of which approximately $2.3 million (23.5 percent) was assumed by the company’s property and casualty insurance subsidiaries. This $2.3 million represents less than 1.0 percent of the company’s projected premium volume for 2003.

“The impact of this action on Farm and City’s 15 employees is certainly a concern to our organization, even though the financial effect is insignificant,” stated Kelley. “Every effort will be made to move these employees into other open positions within our organization.”