Skip to main content

Erie Indemnity Reports Third Quarter 2017 Results

Net Income per Diluted Share was $1.12 for the Quarter and $3.15 Year to Date

ERIE, Pa., Oct. 26, 2017 /PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter ending September 30, 2017.  Net income was $58.5 million, or $1.12 per diluted share, in the third quarter of 2017, compared to $57.4 million, or $1.09 per diluted share, in the third quarter of 2016.  Net income was $164.9 million, or $3.15 per diluted share, in the first nine months of 2017, compared to $164.6 million, or $3.14 per diluted share, in the first nine months of 2016.

3Q and Nine Months 2017

(dollars in thousands)

3Q'17

3Q'16

2017

2016

Operating income

$80,836  

$82,255

$230,414

$235,679

Investment income, net of interest expense

8,029

4,326

20,640

14,289

Income before income taxes

88,865

86,581

251,054

249,968

Income tax expense

30,322

29,205

86,108

85,388

Net income

$58,543

$57,376

$164,946

$164,580

Gross margin from operations

18.3%

19.7%

17.9%

19.4%

(dollars in thousands)

Operating income

3Q'17

$80,836  

3Q'16

$82,255

2017

$230,414

2016

$235,679

(dollars in thousands)

Investment income, net of interest expense

3Q'17

8,029

3Q'16

4,326

2017

20,640

2016

14,289

(dollars in thousands)

Income before income taxes

3Q'17

88,865

3Q'16

86,581

2017

251,054

2016

249,968

(dollars in thousands)

Income tax expense

3Q'17

30,322

3Q'16

29,205

2017

86,108

2016

85,388

(dollars in thousands)

Net income

3Q'17

$58,543

3Q'16

$57,376

2017

$164,946

2016

$164,580

(dollars in thousands)

Gross margin from operations

3Q'17

18.3%

3Q'16

19.7%

2017

17.9%

2016

19.4%

3Q 2017 Highlights

Operating income decreased $1.4 million, or 1.7 percent, in the third quarter of 2017 compared to the third quarter of 2016.

  • Management fee revenue increased $24.1 million, or 5.9 percent, in the third quarter of 2017 compared to the third quarter of 2016.
  • Commissions increased $16.2 million in the third quarter of 2017 compared to the third quarter of 2016, as a result of the 5.8 percent increase in direct and assumed premiums written by the Exchange. The remaining portion of the increase in the third quarter of 2017 was due to higher agent incentive costs related to profitable growth, compared to the third quarter of 2016.
  • Non-commission expense increased $9.3 million in the third quarter of 2017 compared to the third quarter of 2016. Underwriting and policy processing costs increased $2.1 million primarily due to increased personnel costs and underwriting report costs. Information technology costs increased $1.6 million primarily due to increased personnel costs and hardware and software costs, somewhat offset by lower professional fees. Customer service costs increased $1.7 million primarily due to increased credit card processing fees. Administrative and other expenses increased $3.0 million driven by increased personnel costs.
  • The gross margin in the third quarter of 2017 was 18.3 percent compared to 19.7 percent in the third quarter of 2016.

Income from investments before taxes and net of interest expense totaled $8.0 million in the third quarter of 2017 compared to $4.3 million in the third quarter of 2016.  Earnings from limited partnerships were $1.5 million in the third quarter of 2017 compared to losses of $1.7 million in the third quarter of 2016.

Nine Months 2017 Highlights

Operating income decreased $5.3 million, or 2.2 percent, in the first nine months of 2017 compared to the first nine months of 2016.

  • Management fee revenue increased $73.3 million, or 6.1 percent, in the first nine months of 2017 compared to the first nine months of 2016.
  • Commissions increased $43.6 million in the first nine months of 2017 compared to the first nine months of 2016, as a result of the 6.0 percent increase in direct and assumed premiums written by the Exchange. The remaining portion of the increase in the first nine months of 2017 was due to higher agent incentive costs related to profitable growth, compared to the first nine months of 2016.
  • Non-commission expense increased $35.0 million in the first nine months of 2017 compared to the first nine months of 2016. Underwriting and policy processing costs increased $6.0 million primarily due to increased personnel costs and underwriting report costs. Information technology costs increased $15.1 million primarily due to increased professional fees, personnel costs and hardware and software costs. Customer service costs increased $2.0 million primarily due to increased personnel costs and credit card processing fees. Administrative and other expenses increased $12.4 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 nine months of 2017. Additionally, the employee incentive plan program was expanded to additional employee groups beginning in 2017.
  • The gross margin in the first nine months of 2017 was 17.9 percent compared to 19.4 percent in the first nine months of 2016.

Income from investments before taxes and net of interest expense totaled $20.6 million in the first nine months of 2017 compared to $14.3 million in the first nine months of 2016.  Net investment income was $18.2 million in the first nine months of 2017 compared to $14.9 million in the first nine months of 2016, while earnings from limited partnerships were $1.9 million in the first nine months of 2017 compared to losses of $0.3 million in the first nine months of 2016.

Webcast Information

Indemnity has scheduled a conference call and live audio broadcast on the Web for 10:00 AM ET on October 27, 2017.  Investors may access the live audio broadcast by logging on to http://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 11thlargest 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 http://www.erieinsurance.com