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.

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.

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