Press Release

Previous Release Next Release

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%

 



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.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:
Statements contained herein that are not historical fact are forward-looking statements and, as such, are subject to risks and uncertainties that could cause actual events and results to differ, perhaps materially, from those discussed herein. Forward-looking statements relate to future trends, events or results and include, without limitation, statements and assumptions on which such statements are based that are related to our plans, strategies, objectives, expectations, intentions, and adequacy of resources. Examples of forward-looking statements are discussions relating to premium and investment income, expenses, operating results, and compliance with contractual and regulatory requirements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Among the risks and uncertainties, in addition to those set forth in our filings with the Securities and Exchange Commission, that could cause actual results and future events to differ from those set forth or contemplated in the forward-looking statements include the following:

  • dependence upon our relationship with the Exchange and the management fee under the agreement with the subscribers at the Exchange;
  • costs of providing services to the Exchange under the subscriber's agreement and investments in new technology and systems;
  • credit risk from the Exchange;
  • dependence upon our relationship with the Exchange and the growth of the Exchange, including:
    • general business and economic conditions;
    • factors affecting insurance industry competition;
    • dependence upon the independent agency system; and
    • ability to maintain our reputation for customer service;
  • dependence upon our relationship with the Exchange and the financial condition of the Exchange, including:
    • the Exchange's ability to maintain acceptable financial strength ratings;
    • factors affecting the quality and liquidity of the Exchange's investment portfolio;
    • changes in government regulation of the insurance industry;
    • emerging claims and coverage issues in the industry; and
    • severe weather conditions or other catastrophic losses, including terrorism;
  • ability to attract and retain talented management and employees;
  • ability to maintain uninterrupted business operations and difficulties with technology or data security breaches, including cyber attacks;
  • factors affecting the quality and liquidity of our investment portfolio;
  • our ability to meet liquidity needs and access capital; and
  • outcome of pending and potential litigation.

A forward-looking statement speaks only as of the date on which it is made and reflects our analysis only as of that date. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changes in assumptions, or otherwise.

Erie Indemnity Company
Statements of Operations
(dollars in thousands, except per share data)











Three months ended June 30,



Six months ended June 30,




2017



2016



2017



2016




(Unaudited)



(Unaudited)


Operating revenue











Management fee revenue, net


$

441,319



$

416,665



$

833,377



$

784,123


Service agreement revenue


7,245



7,219



14,503



14,489


Total operating revenue


448,564



423,884



847,880



798,612















Operating expenses













Commissions


251,383



235,794



471,861



444,508


Salaries and employee benefits


60,774



55,025



120,514



108,314


All other operating expenses


53,363



47,306



105,927



92,366


Total operating expenses


365,520



338,125



698,302



645,188


Operating income


83,044



85,759



149,578



153,424















Investment income













Net investment income


6,236



4,891



12,214



9,553


Net realized investment gains (losses)


124



399



640



(689)


Net impairment losses recognized in earnings


(61)



0



(182)



(345)


Equity in earnings of limited partnerships


149



2,114



362



1,444


Total investment income


6,448



7,404



13,034



9,963


Interest expense, net


257





423




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




























Earnings Per Share













Net income per share













Class A common stock – basic


$

1.26



$

1.32



$

2.28



$

2.30


Class A common stock – diluted


$

1.12



$

1.17



$

2.03



$

2.04


Class B common stock – basic and diluted


$

189



$

197



$

343



$

345


Class B common stock – diluted


$

188



$

197



$

343



$

345















Weighted average shares outstanding – Basic













Class A common stock


46,180,852



46,188,867



46,184,666



46,188,967


Class B common stock


2,542



2,542



2,542



2,542















Weighted average shares outstanding – Diluted













Class A common stock


52,299,395



52,392,862



52,355,214



52,458,394


Class B common stock


2,542



2,542



2,542



2,542















Dividends declared per share













Class A common stock


$

0.7825



$

0.7300



$

1.565



$

1.460


Class B common stock


$

117.3750



$

109.5000



$

234.750



$

219.000



Erie Indemnity Company
Statements of Financial Position
(in thousands)










June 30, 2017



December 31, 2016




(Unaudited)





Assets







Current assets:







Cash and cash equivalents


$

144,709



$

189,072


Available-for-sale securities


72,057



56,138


Receivables from Erie Insurance Exchange and affiliates


411,422



378,540


Prepaid expenses and other current assets


36,023



30,169


Federal income taxes recoverable


0



5,260


Accrued investment income


6,874



6,337


Total current assets


671,085



665,516









Available-for-sale securities


672,625



657,153


Limited partnership investments


53,230



58,159


Fixed assets, net


71,119



69,142


Deferred income taxes, net


51,811



53,889


Note receivable from Erie Family Life Insurance Company


25,000



25,000


Other assets


22,355



20,096


Total assets


$

1,567,225



$

1,548,955









Liabilities and shareholders' equity







Current liabilities:







Commissions payable


$

232,905



$

210,559


Agent bonuses


62,845



114,772


Accounts payable and accrued liabilities


86,844



88,153


Dividends payable


36,441



36,441


Deferred executive compensation


9,898



19,675


Federal income taxes payable


2,088



0


Total current liabilities


431,021



469,600









Defined benefit pension plans


219,972



221,827


Employee benefit obligations


462



756


Deferred executive compensation


11,810



13,233


Long-term borrowings


49,742



24,766


Other long-term liabilities


1,004



1,863


Total liabilities


714,011



732,045









Shareholders' equity


853,214



816,910


Total liabilities and shareholders' equity


$

1,567,225



$

1,548,955


(ERIE-F)

 

 


CONTACT: Scott Beilharz, Investor Relations, 1-800-458-0811 ext. 7312 or 814/870-7312, scott.beilharz@erieinsurance.com


Previous Release Next Release