Press Release

Previous Release Next Release

Erie Indemnity Reports Full Year and Fourth Quarter 2016 Results


Net Income per Diluted Share Up 20.6 percent for the Full Year

Erie, Pa. - February 23, 2017 - Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the full year and quarter ending December 31, 2016.  Net income was $210.4 million, or $4.01 per diluted share, for the full year 2016, compared to $174.7 million, or $3.33 per diluted share, in 2015.  Net income was $45.8 million, or $0.87 per diluted share, in the fourth quarter of 2016, compared to $30.1 million, or $0.57 per diluted share, in the fourth quarter of 2015.  The growth in 2016 for the fourth quarter and full year was driven by increased net revenue from operations as revenue growth outpaced the growth in expenses.

"We continue to grow profitably", said Tim NeCastro, President and CEO.  "The dedicated work of our Agents and Employees has once again enabled us to beat the industry forecast for 2016 and as we embark upon 2017, we are well positioned for continued long-term growth and value creation."

 

4Q and Total Year 2016

(dollars in thousands)

4Q'15

4Q'16

2015

2016

Net revenue from operations

$

41,839

$

56,685

$

232,541

$

292,364

Investment income, net of interest expense

4,244

13,438

33,708

27,727

Income before income taxes

46,083

70,123

266,249

320,091

Income tax expense

15,950

24,337

91,571

109,725

Net income

$

30,133

$

45,786

$

174,678

$

210,366

Gross margin from operations

11.7

%

14.9

%

15.4

%

18.3

%

 

 

2016 Total Year Highlights

Net revenue from operations before taxes increased $59.8 million, or 25.7 percent, in 2016 compared to 2015.

Income from investments before taxes totaled $27.8 million in 2016, compared to $33.7 million in 2015.  Earnings from limited partnerships were $7.0 million in 2016 compared to earnings of $17.0 million in 2015.


4Q 2016 Highlights

Net revenue from operations before taxes increased $14.8 million, or 35.5 percent, in the fourth quarter of 2016 compared to the fourth quarter of 2015.

Income from investments before taxes totaled $13.5 million in the fourth quarter of 2016, compared to $4.2 million in the fourth quarter of 2015.  Earnings from limited partnerships were $7.3 million in the fourth quarter of 2016 compared to earnings of $0.1 million in the fourth quarter of 2015.

 

Webcast Information

Indemnity has scheduled a conference call and live audio broadcast on the Web for 10:00 AM ET on February 24, 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 12th 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:

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 December 31,

 

Twelve months ended December 31,

 

 

2016

 

2015

 

2016

 

2015

 

 

(Unaudited)

 

 

 

 

Operating revenue

 

 

 

 

 

 

 

 

Management fee revenue, net

 

$

372,169

 

 

$

348,885

 

 

$

1,567,431

 

 

$

1,475,511

 

Service agreement revenue

 

7,444

 

 

7,495

 

 

29,200

 

 

29,997

 

Total operating revenue

 

379,613

 

 

356,380

 

 

1,596,631

 

 

1,505,508

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

Commissions

 

216,837

 

 

206,691

 

 

893,800

 

 

847,880

 

Salaries and employee benefits

 

51,777

 

 

55,998

 

 

213,356

 

 

226,713

 

All other operating expenses

 

54,314

 

 

51,852

 

 

197,111

 

 

198,374

 

Total operating expenses

 

322,928

 

 

314,541

 

 

1,304,267

 

 

1,272,967

 

Net revenue from operations

 

56,685

 

 

41,839

 

 

292,364

 

 

232,541

 

 

 

 

 

 

 

 

 

 

Investment income

 

 

 

 

 

 

 

 

Net investment income

 

5,663

 

 

4,469

 

 

20,547

 

 

17,791

 

Net realized gains on investments

 

643

 

 

617

 

 

672

 

 

492

 

Net impairment losses recognized in earnings

 

(71

)

 

(923

)

 

(416

)

 

(1,558

)

Equity in earnings of limited partnerships

 

7,304

 

 

81

 

 

7,025

 

 

16,983

 

Total investment income

 

13,539

 

 

4,244

 

 

27,828

 

 

33,708

 

Interest expense, net

 

101

 

 

 

 

101

 

 

 

Income before income taxes

 

70,123

 

 

46,083

 

 

320,091

 

 

266,249

 

Income tax expense

 

24,337

 

 

15,950

 

 

109,725

 

 

91,571

 

Net income

 

$

45,786

 

 

$

30,133

 

 

$

210,366

 

 

$

174,678

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings Per Share

 

 

 

 

 

 

 

 

Net income per share

 

 

 

 

 

 

 

 

ClassA common stock – basic

 

$

0.98

 

 

$

0.65

 

 

$

4.52

 

 

$

3.75

 

ClassA common stock – diluted

 

$

0.87

 

 

$

0.57

 

 

$

4.01

 

 

$

3.33

 

ClassB common stock – basic

 

$

147

 

 

$

97

 

 

$

678

 

 

$

563

 

ClassB common stock – diluted

 

$

147

 

 

$

97

 

 

$

677

 

 

$

562

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – Basic

 

 

 

 

 

 

 

 

ClassA common stock

 

46,188,895

 

 

46,179,559

 

 

46,188,952

 

 

46,186,671

 

ClassB common stock

 

2,542

 

 

2,542

 

 

2,542

 

 

2,542

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – Diluted

 

 

 

 

 

 

 

 

ClassA common stock

 

52,413,119

 

 

52,506,600

 

 

52,435,303

 

 

52,498,811

 

ClassB common stock

 

2,542

 

 

2,542

 

 

2,542

 

 

2,542

 

 

 

 

 

 

 

 

 

 

Dividends declared per share

 

 

 

 

 

 

 

 

ClassA common stock

 

$

0.7825

 

 

$

0.7300

 

 

$

2.9725

 

 

$

2.7730

 

ClassB common stock

 

$

117.375

 

 

$

109.500

 

 

$

445.875

 

 

$

415.950

 

 


Erie Indemnity Company

Reconciliation of Net Income to Operating Income

We disclose operating income, a non-GAAP financial measure, to enhance our investors’ understanding of our performance.  Our method of calculating this measure may differ from those used by other companies, and therefore comparability may be limited.

We define operating income as net income excluding realized capital gains and losses, impairment losses, and related federal income taxes.

We use operating income to evaluate the results of our operations.  It reveals trends that may be obscured by the net effects of realized capital gains and losses including impairment losses.  Realized capital gains and losses, including impairment losses, may vary significantly between periods and are generally driven by business decisions and economic developments such as capital market conditions which are not related to our ongoing operations.  We are aware that the price to earnings multiple commonly used by investors as a forward-looking valuation technique uses operating income as the denominator.  Operating income should not be considered as a substitute for net income prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and does not reflect our overall profitability.

The following table reconciles net income and operating income:

 

 

Three months ended December 31,

 

Twelve months ended December 31,

(inthousands,exceptpersharedata)

 

2016

 

2015

 

2016

 

2015

 

 

(Unaudited)

 

 

Net income

 

$

45,786

 

 

$

30,133

 

 

$

210,366

 

 

$

174,678

 

Net realized (gains) losses and impairments on investments

 

(572

)

 

306

 

 

(256

)

 

1,066

 

Income tax expense (benefit)

 

199

 

 

(107

)

 

89

 

 

(373

)

Realized (gains) losses and impairments, net of income taxes

 

(373

)

 

199

 

 

(167

)

 

693

 

Operating income

 

$

45,413

 

 

$

30,332

 

 

$

210,199

 

 

$

175,371

 

 

 

 

 

 

 

 

 

 

Per ClassA common share-diluted:

 

 

 

 

 

 

 

 

Net income

 

$

0.87

 

 

$

0.57

 

 

$

4.01

 

 

$

3.33

 

Net realized (gains) losses and impairments on investments

 

0.00

 

 

0.01

 

 

0.00

 

 

0.02

 

Income tax expense (benefit)

 

0.00

 

 

0.00

 

 

0.00

 

 

(0.01

)

Realized (gains) losses and impairments, net of income taxes

 

0.00

 

 

0.01

 

 

0.00

 

 

0.01

 

Operating income

 

$

0.87

 

 

$

0.58

 

 

$

4.01

 

 

$

3.34

 

 


Erie Indemnity Company

Statements of Financial Position

(in thousands)

 

 

December 31, 2016

 

December 31, 2015

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

189,072

 

 

$

182,889

 

Available-for-sale securities

 

56,138

 

 

62,067

 

Receivables from Erie Insurance Exchange and affiliates

 

378,540

 

 

348,055

 

Prepaid expenses and other current assets

 

30,169

 

 

24,697

 

Federal income taxes recoverable

 

5,260

 

 

11,947

 

Accrued investment income

 

6,337

 

 

5,491

 

Total current assets

 

665,516

 

 

635,146

 

 

 

 

 

 

Available-for-sale securities

 

657,153

 

 

537,874

 

Limited partnership investments

 

58,159

 

 

88,535

 

Fixed assets, net

 

69,142

 

 

59,087

 

Deferred income taxes, net

 

53,889

 

 

40,686

 

Note receivable from Erie Family Life Insurance Company

 

25,000

 

 

25,000

 

Other assets

 

20,096

 

 

20,968

 

Total assets

 

$

1,548,955

 

 

$

1,407,296

 

 

 

 

 

 

Liabilities and shareholders' equity

 

 

 

 

Current liabilities:

 

 

 

 

Commissions payable

 

$

210,559

 

 

$

195,542

 

Agent bonuses

 

114,772

 

 

106,752

 

Accounts payable and accrued liabilities

 

88,153

 

 

88,532

 

Dividends payable

 

36,441

 

 

33,996

 

Deferred executive compensation

 

19,675

 

 

20,877

 

Total current liabilities

 

469,600

 

 

445,699

 

 

 

 

 

 

Defined benefit pension plan

 

221,827

 

 

172,700

 

Employee benefit obligations

 

756

 

 

1,234

 

Deferred executive compensation

 

13,233

 

 

16,580

 

Long-term borrowings

 

24,766

 

 

 

Other long-term liabilities

 

1,863

 

 

1,580

 

Total liabilities

 

732,045

 

 

637,793

 

 

 

 

 

 

Shareholders’ equity

 

816,910

 

 

769,503

 

Total liabilities and shareholders’ equity

 

$

1,548,955

 

 

$

1,407,296

 

 

 

Previous Release Next Release