Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter ending June 30, 2016. Net income was $61.3 million, or $1.17 per diluted share, in the second quarter of 2016, compared to $56.2 million, or $1.07 per diluted share, in the second quarter of 2015. Net income was $107.2 million, or $2.04 per diluted share, in the first six months of 2016, compared to $95.0 million, or $1.81 per diluted share, in the first six months of 2015. Revenue growth in both the second quarter and first six months of 2016 outpaced the growth in expenses.
"Prudent expense management helped Indemnity's revenue outpace expense growth once again this quarter, resulting in an uptick in operating margin and increased earnings per share," said Terry Cavanaugh , President and CEO.
2Q and First Half 2016
|
(dollars in thousands) |
2Q'15 |
2Q'16 |
1H'15 |
1H'16 |
|---|---|---|---|---|
|
Net revenue from operations |
$69,983 |
$85,759 |
$122,413 |
$153,424 |
|
Investment income |
15,705 |
7,404 |
22,244 |
9,963 |
|
Income before income taxes |
85,688 |
93,163 |
144,657 |
163,387 |
|
Income tax expense |
29,538 |
31,854 |
49,674 |
56,183 |
|
Net income |
$56,150 |
$61,309 |
$94,983 |
$107,204 |
|
Gross margin from operations |
17.4 % |
20.2 % |
16.3 % |
19.2 % |
2Q 2016 Highlights
Net revenue from operations before taxes increased $15.8 million, or 22.5 percent, in the second quarter of 2016 compared to the second quarter of 2015.
- Management fee revenue increased $22.4 million, or 5.7 percent, in the second quarter of 2016 compared to the second quarter of 2015.
- Commissions increased $12.1 million in the second quarter of 2016 compared to the second quarter of 2015, primarily as a result of the 5.8 percent increase in direct and assumed premiums written by the Exchange.
- Non-commission expense decreased $5.6 million in the second quarter of 2016 compared to the second quarter of 2015. Information technology costs decreased $4.9 million driven by decreased professional fees and personnel costs. Customer service costs decreased $1.0 million primarily due to decreased credit card processing fees. Personnel costs in all expense categories were impacted by decreased pension costs primarily due to an increase in the pension discount rate.
- The gross margin in the second quarter of 2016 was 20.2 percent compared to 17.4 percent in the second quarter of 2015.
Income from investments before taxes totaled $7.4 million in the second quarter of 2016 compared to $15.7 million in the second quarter of 2015. Earnings from limited partnerships were $2.1 million in the second quarter of 2016 compared to $10.7 million in the second quarter of 2015.
First Half 2016 Highlights
Net revenue from operations before taxes increased $31.0 million, or 25.3 percent, in the first six months of 2016 compared to the first six months 2015.
- Management fee revenue increased $46.7 million, or 6.3 percent, in the first six months of 2016 compared to the first six months 2015.
- Commissions increased $27.1 million in the first six months of 2016 compared to the first six months 2015, primarily as a result of the 6.4 percent increase in direct and assumed premiums written by the Exchange, while approximately one-quarter of the increase was due to higher agent incentive costs primarily related to profitable growth.
- Non-commission expense decreased $12.0 million in the first six months of 2016 compared to the first six months 2015. Information technology costs decreased $9.6 million driven by decreased professional fees and personnel costs. Customer service costs decreased $1.0 million primarily due to decreased credit card processing fees. Administrative and other expenses decreased $2.3 million primarily due to decreased personnel costs. Personnel costs in all expense categories were impacted by decreased pension costs primarily due to an increase in the pension discount rate.
- The gross margin in the first six months of 2016 was 19.2 percent compared to 16.3 percent in the first six months 2015.
Income from investments before taxes totaled $10.0 million in the first six months of 2016 compared to $22.2 million in the first six months 2015. Earnings from limited partnerships were $1.4 million in the first six months of 2016 compared to $13.1 million in the first six months 2015.
Webcast Information
Indemnity has scheduled a conference call and live audio broadcast on the Web for 10:00 AM ET on July 29, 2016. 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.