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Erie Indemnity Reports Full Year and Fourth Quarter 2014 Results

Net Income per Diluted Share is $3.18, up $0.10 for the Year

Erie, Pa. - February 26, 2015 - Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the full year and the quarter ending December 31, 2014. Net income per diluted share was $3.18 for the full year 2014 compared to $3.08 for 2013. Net income per diluted share in the fourth quarter of 2014 was $0.48 compared to $0.67 in the fourth quarter of 2013.

"ERIE continues to achieve strong results through sound execution of our business strategy and the steadfast commitment of our Agents, Customers and Employees," said Terry Cavanaugh, President and CEO. "As we celebrate our 90th anniversary in 2015, we are well positioned for continued long-term growth and value creation."

Income from management operations before taxes increased $14 million, or 6.5 percent, in 2014 compared to the prior year.

  • Revenue from management operations increased $110 million, or 8.5 percent. Direct written premium from the property and casualty insurance operations, upon which the management fee is calculated, increased 8.6 percent for the year due to a 4.3 percent increase in policies in force and a 4.2 percent increase in the year-over-year average premium per policy at December 31, 2014.
  • Commissions increased $73 million, or 10.3 percent, in 2014 compared to the prior year primarily due to the 8.6 percent increase in direct written premium from the property and casualty insurance operations. Commission growth outpaced direct premium written growth primarily due to an increase in agent incentive costs related to profitable growth.
  • Non-commission expense increased $23 million, or 6.2 percent, in 2014 compared to 2013. Information technology costs increased $13 million, which included $6 million of professional fees, $4 million of personnel costs, and $3 million of hardware and software costs. Underwriting and policy processing costs increased $7 million due to the increased cost of underwriting reports, postage, and printing costs related to increased volume. Customer service costs increased $4 million due to an increase of $2 million in credit card processing fees and $2 million in personnel costs. All other operating costs decreased $1 million.

Income from investment operations before taxes totaled $28 million in 2014 compared to $38 million in the prior year. Earnings from limited partnerships were $11 million in 2014 compared to earnings of $22 million in 2013.

In 2014, Indemnity returned $119 million to shareholders as dividends and $20 million through share repurchases of Class A nonvoting common stock.

Income from management operations before taxes decreased $6 million, or 13.3 percent, in the fourth quarter of 2014 compared to the fourth quarter of 2013.

  • Revenue from management operations increased $28 million, or 9.1 percent, in the fourth quarter of 2014 compared to the fourth quarter of 2013.
  • Commissions increased $24 million, or 13.3 percent, in the fourth quarter of 2014 compared to the fourth quarter of 2013 primarily due to the 9.0 percent increase in direct written premium from the property and casualty insurance operations. Commission growth outpaced direct premium written growth primarily due to an increase in agent incentive costs related to profitable growth.
  • Non-commission expense increased $10 million, or 11.1 percent, in the fourth quarter of 2014 compared to the fourth quarter of 2013. Administrative and other costs increased $5 million in the quarter, primarily due to increased costs associated with the long term incentive plan and the Director's deferred compensation plan. These plans include a component based on Indemnity share price and the share price increased substantially during the fourth quarter of 2014. Additionally, certain employee incentive plan costs increased due to the improved underwriting results in the quarter. Information technology costs increased $3 million, which included a $1 million increase in professional fees, personnel costs and hardware and software costs. All other operating costs increased $2 million.

Income from investment operations before taxes totaled $2 million in the fourth quarter of 2014, compared to $13 million in the fourth quarter of 2013. Losses from limited partnerships were $2 million in the fourth quarter of 2014 compared to earnings of $9 million in the fourth quarter of 2013.

Webcast Information

Indemnity has scheduled a conference call and live audio broadcast on the Web for 10:00 AM ET on February 27, 2015. Investors may access the live audio broadcast by logging on to www.erieinsurance.com. Indemnity recommends visiting the website at least 15 minutes prior to the Webcast to download and install any necessary software. A Webcast audio replay will be available on the Investor Relations page of the Erie Insurance Group's website by 12:30 PM ET.