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Erie Indemnity Reports Second Quarter 2017 Results


Net Income per Diluted Share was $1.12 for the Quarter and $2.03 Year to Date

ERIE, Pa., July 27, 2017 /PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter ending June 30, 2017. Net income was $58.5 million, or $1.12 per diluted share, in the second quarter of 2017, compared to $61.3 million, or $1.17 per diluted share, in the second quarter of 2016. Net income was $106.4 million, or $2.03 per diluted share, in the first six months of 2017, compared to $107.2 million, or $2.04 per diluted share, in the first six months of 2016.

2Q and First Half 2017

(dollars in thousands)

2Q'17

2Q'16

1H'17

1H'16

Operating income

$83,044

$85,759

$149,578

$153,424

Investment income, net of interest expense

6,191

7,404

12,611

9,963

Income before income taxes

89,235

93,163

162,189

163,387

Income tax expense

30,708

31,854

55,786

56,183

Net income

$58,527

$61,309

$106,403

$107,204

Gross margin from operations

18.5%

20.2%

17.6%

19.2%

(dollars in thousands)

Operating income

2Q'17

$83,044

2Q'16

$85,759

1H'17

$149,578

1H'16

$153,424

(dollars in thousands)

Investment income, net of interest expense

2Q'17

6,191

2Q'16

7,404

1H'17

12,611

1H'16

9,963

(dollars in thousands)

Income before income taxes

2Q'17

89,235

2Q'16

93,163

1H'17

162,189

1H'16

163,387

(dollars in thousands)

Income tax expense

2Q'17

30,708

2Q'16

31,854

1H'17

55,786

1H'16

56,183

(dollars in thousands)

Net income

2Q'17

$58,527

2Q'16

$61,309

1H'17

$106,403

1H'16

$107,204

(dollars in thousands)

Gross margin from operations

2Q'17

18.5%

2Q'16

20.2%

1H'17

17.6%

1H'16

19.2%


2Q 2017 Highlights

Operating income decreased $2.7 million, or 3.2 percent, in the second quarter of 2017 compared to the second quarter of 2016.

  • Management fee revenue increased $24.7 million, or 5.9 percent, in the second quarter of 2017 compared to the second quarter of 2016.
  • Commissions increased $15.6 million in the second quarter of 2017 compared to the second quarter of 2016, as a result of the 5.7 percent increase in direct and assumed premiums written by the Exchange. The remaining portion of the increase in the second quarter of 2017 was due to higher agent incentive costs related to profitable growth, compared to the second quarter of 2016.
  • Non-commission expense increased $11.8 million in the second quarter of 2017 compared to the second quarter of 2016. Information technology costs increased $7.1 million primarily due to increased professional fees and personnel costs. Underwriting and policy processing costs increased $1.9 million primarily due to increased personnel costs and underwriting report costs. Administrative and other expenses increased $2.6 million driven by increased professional fees and personnel costs.
  • The gross margin in the second quarter of 2017 was 18.5 percent compared to 20.2 percent in the second quarter of 2016.

Income from investments before taxes totaled $6.4 million in the second quarter of 2017 compared to $7.4 million in the second quarter of 2016. Earnings from limited partnerships were $0.1 million in the second quarter of 2017 compared to $2.1 million in the second quarter of 2016, while net investment income was $6.2 million in the second quarter of 2017 compared to $4.9 million in the second quarter of 2016.

First Half 2017 Highlights

Operating income decreased $3.8 million, or 2.5 percent, in the first six months of 2017 compared to the first six months of 2016.

  • Management fee revenue increased $49.3 million, or 6.3 percent, in the first six months of 2017 compared to the first six months of 2016.
  • Commissions increased $27.4 million in the first six months of 2017 compared to the first six months of 2016, as a result of the 6.2 percent increase in direct and assumed premiums written by the Exchange.
  • Non-commission expense increased $25.8 million in the first six months of 2017 compared to the first six months of 2016. Information technology costs increased $13.6 million primarily due to increased professional fees. Underwriting and policy processing costs increased $3.9 million primarily due to increased personnel costs and underwriting report costs. Administrative and other expenses increased $9.4 million primarily driven by increased personnel costs, including higher incentive plan costs and pension expenses. The incentive plan cost increase was driven by the long-term incentive plan due to the increase in the company stock price during the first six months of 2017. Additionally, the employee incentive plan program was expanded to additional employee groups beginning in 2017.
  • The gross margin in the first six months of 2017 was 17.6 percent compared to 19.2 percent in the first six months of 2016.

Income from investments before taxes totaled $13.0 million in the first six months of 2017 compared to $10.0 million in the first six months of 2016. Net investment income was $12.2 million in the first six months of 2017 compared to $9.6 million in the first six months of 2016, while net realized gains on investments were $0.6 million in the first six months of 2017 compared to net realized losses of $0.7 million in the first six months of 2016.

Webcast Information
Indemnity has scheduled a conference call and live audio broadcast on the Web for 10:00 AM ET on July 28, 2017. 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 website by 12:30 PM ET.

Erie Insurance Group
According to A.M. Best Company, Erie Insurance Group, based in Erie, Pennsylvania, is the 10th largest homeowners insurer and 11th largest automobile insurer in the United States based on direct premiums written and the 15th largest property/casualty insurer in the United States based on total lines net premium written. The Group, rated A+ (Superior) by A.M. Best Company, has more than 5 million policies in force and operates in 12 states and the District of Columbia. Erie Insurance Group is a FORTUNE 500 company.

News releases and more information about Erie Insurance Group are available at www.erieinsurance.com.