Net Income per Diluted Share up 37.4 percent for the Quarter and 37.0 percent Year to Date
Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter ending September 30, 2018. Net income was $80.4 million, or $1.54 per diluted share, in the third quarter of 2018, compared to $58.5 million, or $1.12 per diluted share, in the third quarter of 2017. Net income was $225.9 million, or $4.32 per diluted share, in the first nine months of 2018, compared to $164.9 million, or $3.15 per diluted share, in the first nine months of 2017.
3Q and Nine Months 2018
|
(dollars in thousands) |
3Q'18 |
3Q'17 |
2018 |
2017 |
|---|---|---|---|---|
|
Operating income |
$96,695 |
$81,239 |
$269,585 |
$231,627 |
|
Investment income |
8,431 |
8,418 |
20,801 |
21,458 |
|
Interest expense and other, net |
655 |
792 |
1,708 |
2,031 |
|
Income before income taxes |
104,471 |
88,865 |
288,678 |
251,054 |
|
Income tax expense |
24,025 |
30,322 |
62,768 |
86,108 |
|
Net income |
$80,446 |
$58,543 |
$225,910 |
$164,946 |
3Q 2018 Highlights
Operating income before taxes increased $15.5 million, or 19.0 percent, in the third quarter of 2018 compared to the third quarter of 2017, as the growth in total operating revenue outpaced the growth in total operating expenses.
- Management fee revenue - policy issuance and renewal services increased $16.1 million, or 3.7 percent, in the third quarter of 2018 compared to the third quarter of 2017.
- Management fee revenue allocated to administrative services was $13.5 million in the third quarter of 2018.No management fee revenue was allocated to administrative services in the third quarter of 2017.
- Cost of operations - policy issuance and renewal services
- Commissions increased $8.1 million in the third quarter of 2018 compared to the third quarter of 2017, as a result of the 7.1 percent increase in direct and assumed premiums written by the Exchange, slightly offset by lower agent incentive costs related to less profitable growth, compared to the third quarter of 2017.
- Non-commission expense increased $5.9 million in the third quarter of 2018 compared to the same period in 2017.Information technology costs increased $4.0 million primarily due to higher professional fees.Administrative and other expenses increased $2.4 million primarily due to higher professional fees and personnel costs.Personnel costs in all expense categories were impacted by lower estimated costs for incentive plan awards related to underwriting performance.
- The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $140.2 million in the third quarter of 2018, but had no net impact on operating income.
Income from investments before taxes totaled $8.4 million in both the third quarters of 2018 and 2017. Net investment income was $7.7 million in the third quarter of 2018 compared to $6.0 million in the third quarter of 2017, while earnings on limited partnerships were $0.8 million in the third quarter of 2018 compared to $1.5 million in the third quarter of 2017.
Income before income taxes increased $15.6 million in the third quarter of 2018, while income tax expense decreased $6.3 million in the third quarter of 2018, due to the lower income tax rate of 21% which became effective January 1, 2018.
Nine Months 2018 Highlights
Operating income before taxes increased $38.0 million, or 16.4 percent, in the first nine months of 2018 compared to the first nine months of 2017, as the growth in total operating revenue outpaced the growth in total operating expenses.
- Management fee revenue - policy issuance and renewal services increased $43.3 million, or 3.4 percent, in the first nine months of 2018 compared to the first nine months of 2017.
- Management fee revenue allocated to administrative services was $39.9 million in the first nine months of 2018.No management fee revenue was allocated to administrative services in the first nine months of 2017.
- Cost of operations - policy issuance and renewal services
- Commissions increased $31.9 million in the first nine months of 2018 compared to the first nine months of 2017, as a result of the 6.9 percent increase in direct and assumed premiums written by the Exchange, slightly offset by lower agent incentive costs related to less profitable growth, compared to the first nine months of 2017.
- Non-commission expense increased $12.9 million for the nine months ended September 30, 2018 compared to the same period in 2017.Underwriting and policy processing costs increased $5.3 million primarily due to increased personnel costs and underwriting report costs.Information technology costs increased $2.7 million primarily due to increased personnel costs.Customer service costs increased $3.4 million primarily due to increased personnel costs and credit card processing fees.Personnel costs in all expense categories were higher due to additional bonuses of approximately $4.8 million awarded to all employees as a result of tax savings realized from the lower corporate income tax rate that became effective January 1, 2018 as well as increased pension and medical costs.The total increase in personnel costs was somewhat offset by lower estimated costs for incentive plan awards related to underwriting performance.
- The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $432.6 million in the first nine months of 2018, but had no net impact on operating income.
Income from investments before taxes totaled $20.8 million in the first nine months of 2018 compared to $21.5 million in the first nine months of 2017. Net realized losses on investments were $0.5 million in the first nine months of 2018 compared to net realized gains of $1.5 million in the first nine months of 2017 and earnings on limited partnerships were $0.4 million in the first nine months of 2018 compared to $1.9 million in the first nine months of 2017, while net investment income was $21.6 million in the first nine months of 2018 compared to $18.2 million in the first nine months of 2017.
Income before income taxes increased $37.6 million in the first nine months of 2018, while income tax expense decreased $23.3 million in the first nine months of 2018, due to the lower income tax rate of 21% which became effective January 1, 2018.
Webcast Information
Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on October 26, 2018. Investors may access the pre-recorded audio broadcast by logging on to www.erieinsurance.com.