Erie, Pa. - July 30, 2015 - Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter ending June 30, 2015. Net income attributable to Indemnity was $56 million, or $1.07 per diluted share, in the second quarter of 2015, compared to $49 million, or $0.94 per diluted share, in the second quarter of 2014. Net income attributable to Indemnity was $95 million, or $1.81 per diluted share, in the first six months of 2015, compared to $95 million, or $1.82 per diluted share, in the first six months of 2014. For the second quarter of 2015, the growth was driven primarily by increased revenue from investment operations.
“Erie Indemnity continues to benefit from the premium growth of the Exchange which is currently outpacing the industry by nearly double Conning’s 3.8% forecast for 2015,” said Terry Cavanaugh, President and CEO.
2Q and First Half 2015 - Results of Indemnity Shareholder Interest
|
(dollars in millions) |
2Q'14 |
2Q'15 |
1H'14 |
1H'15 |
|---|---|---|---|---|
|
Management operations |
$68 |
$70 |
$126 |
$123 |
|
Investment operations |
7 |
16 |
18 |
22 |
|
Income before income taxes |
75 |
86 |
144 |
145 |
|
Provision for income taxes |
26 |
30 |
49 |
50 |
|
Net income |
$49 |
$56 |
$95 |
$95 |
|
Gross margin from management operations |
18.2 % |
17.4 % |
18.0 % |
16.3 % |
2Q 2015 Highlights
Management Operations
Income from management operations before taxes increased $2 million, or 3.0 percent, in the second quarter of 2015 compared to the second quarter of 2014.
- Revenue from management operations increased $28 million, or 7.4 percent, in the second quarter of 2015 compared to the second quarter of 2014.
- Commissions increased $19 million in the second quarter of 2015, compared to the same period in 2014. The majority of the increase was driven by the 7.6 percent increase in direct written premiums of the Property and Casualty Group, while about one-third of the increase was due to an increase in agent incentive costs related to profitable growth, compared to the prior year quarter. The estimated agent incentive payout, at the end of each quarter, is based on actual underwriting results for the two prior years and the current year-to-date period. Therefore, fluctuations in the current quarter underwriting results can impact the estimated incentive payout on a quarter-to-quarter basis.
- Non-commission expense increased $7 million in the second quarter of 2015, compared to the second quarter of 2014. Underwriting and policy processing costs increased $3 million due to increased personnel costs. Information technology costs increased $2 million due to increased professional fees. Personnel costs in all expense categories include a total increase of $3 million related to pension and medical costs in the second quarter of 2015 compared to the same period in 2014.
- The gross margin in the second quarter of 2015 was 17.4 percent, compared to 18.2 percent in the second quarter of 2014. The 0.8 point decrease in gross margin for the second quarter was driven primarily by the increased estimated agent incentive payout discussed above.
Investment Operations
Income from investment operations before taxes totaled $16 million in the second quarter of 2015, compared to $7 million in the second quarter of 2014, primarily from higher earnings from limited partnerships. Earnings from limited partnerships were $11 million in the second quarter of 2015 compared to earnings of $3 million in the second quarter of 2014.
First Half 2015 Highlights
Management Operations
Income from management operations before taxes decreased $3 million, or 3.1 percent, in the first six months of 2015 compared to the first six months of 2014.
- Revenue from management operations increased $53 million, or 7.5 percent, in the first six months of 2015 compared to the first six months of 2014.
- Commissions increased $39 million in the first six months of 2015, compared to the same period in 2014. The majority of the increase was driven by the 7.6 percent increase in direct written premiums of the Property and Casualty Group, while about one-third of the increase was due to an increase in agent incentive costs related to profitable growth, compared to the prior year. The estimated agent incentive payout, at the end of each quarter, is based on actual underwriting results for the two prior years and the current year-to-date period. Therefore, fluctuations in the current quarter underwriting results can impact the estimated incentive payout on a quarter-to-quarter basis.
- Non-commission expense increased $17 million in the first six months of 2015, compared to the same period in 2014. Underwriting and policy processing costs increased $3 million due to increased personnel costs. Information technology costs increased $7 million, which included $5 million in professional fees and $1 million each of hardware and software costs and personnel costs. Administrative and other expenses increased $4 million related to professional fees and personnel costs. Personnel costs in all expense categories include a total increase of $4 million related to pension and medical costs in the first six months of 2015 compared to the same period in 2014.
- The gross margin for the first six months of 2015 was 16.3 percent, compared to 18.0 percent for the first six months of 2014. The 1.7 point decrease in gross margin for the first six months of 2015 was driven primarily by the increased estimated agent incentive payout discussed above.
Investment Operations
Income from investment operations before taxes totaled $22 million in the first six months of 2015, compared to $18 million in the first six months of 2014. Earnings from limited partnerships were $13 million in the first six months of 2015 compared to earnings of $9 million in the first six months of 2014.
Webcast Information
Indemnity has scheduled a conference call and live audio broadcast on the Web for 10:00 AM ET on July 31, 2015. 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 Group’s website by 12:30 PM ET.