Erie Indemnity Reports First Quarter 2017 Results

Earnings Up 4.3 percent, Net Income per Diluted Share Up 4.5 percent for the Quarter

Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter ending March 31, 2017. Net income was $47.9 million, or $0.91 per diluted share, in the first quarter of 2017, compared to $45.9 million, or $0.87 per diluted share, in the first quarter of 2016.

"We are off to a good start in 2017. Solid topline growth combined with prudent expense management and improved investment returns, resulted in increased earnings per share for the quarter," said Tim NeCastro, President and CEO.

1Q 2017

(dollars in thousands)	1Q'16	1Q'17
Net revenue from operations	$67,665	$ 66,534
Investment income, net of interest expense	2,559	6,420
Income before income taxes	70224	72954
Income tax expense	24329	25078
Net income	$45,895	$47,876
Gross margin from operations	18.1%	16.7%

1Q 2017 Highlights

Net revenue from operations decreased $1.1 million, or 1.7 percent, in the first quarter of 2017 compared to the first quarter of 2016.

• Management fee revenue increased $24.6 million, or 6.7 percent, in the first quarter of 2017 compared to the first quarter of 2016. 
• Commissions increased $11.8 million in the first quarter of 2017 compared to the first quarter of 2016, as a result of the 6.7 percent increase in direct and assumed premiums written by the Exchange.
• Non-commission expense increased $14.0 million in the first quarter of 2017 compared to the first quarter of 2016. Information technology costs increased $6.4 million primarily due to increased professional fees. Underwriting and policy processing costs increased $2.0 million primarily due to the increased cost of underwriting reports. Administrative and other expenses increased $6.8 million driven by increased personnel costs, including higher incentive plan costs, increased pension plan expenses and increased earnings on deferred compensation. The incentive plan cost increase was driven by the long-term incentive plan due to the increase in the company stock price during the quarter. Additionally, the employee incentive plan program was expanded to additional employee groups beginning in 2017. All other operating costs decreased $1.2 million.
• The gross margin in the first quarter of 2017 was 16.7 percent compared to 18.1 percent in the first quarter of 2016.

Income from investments before taxes totaled $6.6 million in the first quarter of 2017 compared to $2.6 million in the first quarter of 2016. Net investment income was $6.0 million in the first quarter of 2017 compared to $4.7 million in the first quarter of 2016, while net realized gains on investments were $0.5 million in the first quarter of 2017 compared to realized losses of $1.1 million in the first quarter of 2017.

Webcast Information

Indemnity has scheduled a conference call and live audio broadcast on the Web for 10:00 AM ET on May 2, 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 .

Erie Indemnity Company Statements of Operations

(dollars in thousands, except per share data)	Three months ended March 31, 2017 (Unaudited)	2016
Operating revenue
Management fee revenue, net	$ 392,058	$367,458
Service agreement revenue	7,258	7,270
Total operating revenue	399,316	374,728
Operating expenses
Commissions	220,478	208,714
Salaries and employee benefits	59,740	53,289
All other operating expenses	52,564	45,060
Total operating expenses	332,782	307,063
Net revenue from operations	66,534	67,665
Investment income
Net investment income	5,978	4,662
Net realized investment gains (losses)	516	1088
Net impairment losses recognized in earnings	121	345
Equity in earnings (losses) of limited partnerships	213	670
Total investment income	6,586	2,559
Interest expense, net	166	--
Income before income taxes	72,954	70,224
Income tax expense	25,078	24,329
Net income	$ 47,876	$ 45,895
Earnings Per Share
Net income per share
ClassA common stock – basic	$ 1.03	$ 0.99
ClassA common stock – diluted	$ 0.91	$ 0.87
ClassB common stock – basic and diluted	$ 154	$ 148
Weighted average shares outstanding – Diluted
ClassA common stock	46,188,522	46,189,068
ClassB common stock	2,542	2,542
Weighted average shares outstanding – Diluted
ClassA common stock	52,408,560	52,523,927
ClassB common stock	2,542	2,542
Dividends declared per share
ClassA common stock	$ 0.7825	$ 0.7300
ClassB common stock	$ 117.3750	$ 109.5000