ERIE, Pa., Feb. 27, 2014 /PRNewswire/ --
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4Q 2013 Highlights
- Indemnity Shareholder Interest
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- Net income attributable to Indemnity per share-diluted was
$0.67 per share in the fourth quarter of 2013, compared to net
income per share-diluted of $0.56 per share in the fourth quarter
of 2012.
- Operating income attributable to Indemnity per share-diluted
(excluding net realized gains or losses, impairments on investments
and related taxes) was $0.67 per share in the fourth quarter of
2013, compared to operating income per share-diluted of $0.54 per
share in the fourth quarter of 2012.
- Indemnity's management operations pretax income totaled $41
million for the fourth quarter of 2013, compared to $34 million for
the fourth quarter of 2012. The gross margin from management
operations was 13.2 percent in the fourth quarter of 2013, compared
to 12.2 percent in the fourth quarter of 2012.
- Indemnity's investment operations pretax income totaled $13
million for the fourth quarter of 2013, compared to $10 million for
the fourth quarter of 2012.
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Total Year 2013
Highlights - Indemnity Shareholder Interest
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- Net income attributable to Indemnity per share-diluted was
$3.08 per share for the year ended December 31, 2013, compared to
net income per share-diluted of $2.99 per share for the year ended
December 31, 2012.
- Operating income attributable to Indemnity per share-diluted
(excluding net realized gains or losses, impairments on investments
and related taxes) was $3.07 per share for the year ended December
31, 2013, compared to operating income per share-diluted of $2.92
per share for the year ended December 31, 2012.
- Indemnity's management operations pretax income totaled $209
million for the year ended December 31, 2013, compared to $205
million for the year ended December 31, 2012. The gross margin from
management operations was 16.1 percent for the year ended December
31, 2013, compared to 17.3 percent for the year ended December 31,
2012.
- Indemnity's investment operations pretax income totaled $38
million for the year ended December 31, 2013, compared to $36
million for the year ended December 31, 2012.
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Erie Indemnity Company (NASDAQ: ERIE) today announced fourth quarter 2013
earnings of $36 million, compared to
earnings of $30 million in the fourth
quarter of 2012. Operating income was $36 million in the fourth quarter of 2013,
compared to $29 million in the fourth
quarter of 2012.
For the year ended December 31, 2013, Erie Indemnity
Company's earnings totaled $163
million, compared to earnings of $160
million for the year ended December 31, 2012.
Operating income was $162 million for
the year ended December 31, 2013, compared to operating income
of $157 million or the year ended
December 31, 2012.
4Q 2013 Results of
the Erie Insurance Group's Operations(1)
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Indemnity
shareholder
interest
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Noncontrolling
interest
(Exchange)
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Elimination
of
related
party
transactions
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Erie
Insurance Group
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(dollars in
millions)
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4Q'13
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4Q'12
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4Q'13
|
4Q'12
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4Q'13
|
4Q'12
|
4Q'13
|
4Q'12
|
Management
operations
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$
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41
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$
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34
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$
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—
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$
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—
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|
$
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(33)
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$
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(26)
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$
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8
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$
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8
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Property and casualty
insurance operations(2)
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—
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—
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22
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(61)
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37
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30
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59
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(31)
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Life insurance
operations(2)
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—
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—
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14
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12
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0
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(1)
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14
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11
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Investment
operations
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13
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10
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380
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170
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(4)
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(3)
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389
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177
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Income from
operations before income
taxes and
noncontrolling interest
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54
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44
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416
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121
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—
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—
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470
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165
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Provision for income
taxes
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18
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|
14
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138
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32
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|
—
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—
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|
156
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|
46
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Net income
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$
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36
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$
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30
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$
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278
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$
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89
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$
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—
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$
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—
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$
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314
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$
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119
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(1)
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The consolidated
financial statements of Erie Indemnity Company ("Indemnity")
reflect the consolidated results of Indemnity and the Erie
Insurance Exchange ("Exchange"), which we refer to collectively as
the "Erie Insurance Group." Indemnity, or Indemnity
shareholder interest, refers to the interest in Erie Indemnity
Company owned by the Class A and Class B shareholders. The
Exchange refers to the noncontrolling interest held for the
interest of the subscribers (policyholders), and includes its
interest in its property and casualty subsidiaries and Erie Family
Life Insurance Company ("EFL").
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(2)
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All property and
casualty and life insurance results accrue to the interest of the
subscribers (policyholders) of the Exchange, or noncontrolling
interest.
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The following tables and discussion show the operating
results attributable to the Indemnity shareholder interest in the
Erie Indemnity Company owned by the Class A and Class B
shareholders for the fourth quarter of 2013.
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Management
Operations
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Indemnity
shareholder
interest
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(dollars in
millions)
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4Q'13
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4Q'12
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Management fee
revenue, net
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$
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301
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$
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275
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Service agreement
revenue
|
8
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8
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Total revenue from
management operations
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$
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309
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$
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283
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Commissions
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$
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172
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$
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158
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Non-commission
expense
|
96
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91
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Total cost of
management operations
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$
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268
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$
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249
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Income from
management operations before taxes
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$
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41
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$
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34
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Gross
margin
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13.2
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%
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12.2
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%
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- The management fee rate was 25 percent for both the fourth
quarters of 2013 and 2012. Direct written premium of the
property and casualty insurance operations, upon which the
management fee is calculated, increased 9.5 percent in the fourth
quarter of 2013, due to a 4.8 percent increase in policies in force
and a 4.5 percent increase in the year-over-year average premium
per policy for all lines of business at December 31,
2013.
- Commissions increased $14
million, or 8.8 percent, in the fourth quarter of 2013,
compared to the fourth quarter of 2012, primarily due to the 9.5
percent increase in direct written premium of the property and
casualty insurance operations. All other commissions remained
relatively flat compared to the fourth quarter of 2012.
- Non-commission expense increased $5
million, or 5.4 percent, in the fourth quarter of 2013,
compared to the fourth quarter of 2012. Personnel costs
increased $4 million, driven by a
$1 million increase in both pension
and medical expenses and by a $2
million increase in the estimate for incentive plan
compensation related to growth and underwriting performance.
All other operating costs increased $1
million.
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Investment
Operations
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Indemnity
shareholder
interest
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(dollars in
millions)
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4Q'13
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4Q'12
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Net investment
income
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$
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4
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$
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4
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Net realized gains on
investments
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0
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1
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Net impairment losses
recognized in earnings
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0
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0
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Equity in earnings of
limited partnerships
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9
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5
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Income from
investment operations before taxes
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$
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13
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$
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10
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- Income from investment operations before taxes was $13 million in the fourth quarter of 2013,
compared to $10 million in the fourth
quarter of 2012. Equity in earnings of limited partnerships
increased $4 million, offset by a
decrease of $1 million in net
realized gains on investments.
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Total Year 2013
Results of the Erie Insurance Group's
Operations(1)
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Indemnity
shareholder
interest
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Noncontrolling
interest
(Exchange)
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Elimination
of
related
party
transactions
|
Erie
Insurance
Group
|
(dollars in
millions)
|
2013
|
2012
|
2013
|
2012
|
2013
|
2012
|
2013
|
2012
|
Management
operations
|
$
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209
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|
$
|
205
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$
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—
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|
$
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—
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|
$
|
(178)
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|
$
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(174)
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$
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31
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$
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31
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|
Property and casualty
insurance operations(2)
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—
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—
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68
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(246)
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|
192
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187
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|
260
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(59)
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Life insurance
operations(2)
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—
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—
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48
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46
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(2)
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(2)
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46
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44
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Investment
operations
|
38
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|
36
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1,204
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|
858
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(12)
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(11)
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1,230
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|
883
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Income from
operations before income
taxes and
noncontrolling interest
|
247
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|
241
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|
1,320
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|
658
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—
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—
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|
1,567
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|
899
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Provision for income
taxes
|
84
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|
81
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|
435
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|
199
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|
—
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—
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|
519
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|
280
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Net income
|
$
|
163
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|
$
|
160
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$
|
885
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$
|
459
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$
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—
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$
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—
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$
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1,048
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$
|
619
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(1)
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The consolidated
financial statements of Erie Indemnity Company ("Indemnity")
reflect the consolidated results of Indemnity and the Erie
Insurance Exchange ("Exchange"), which we refer to collectively as
the "Erie Insurance Group." Indemnity, or Indemnity
shareholder interest, refers to the interest in Erie Indemnity
Company owned by the Class A and Class B shareholders. The
Exchange refers to the noncontrolling interest held for the
interest of the subscribers (policyholders), and includes its
interest in its property and casualty subsidiaries and Erie Family
Life Insurance Company ("EFL").
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(2)
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All property and
casualty and life insurance results accrue to the interest of the
subscribers (policyholders) of the Exchange, or noncontrolling
interest.
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In the fourth quarter of 2013, Indemnity repurchased 142,132
shares of its outstanding Class A nonvoting common stock at a total
cost of $10.2 million, based upon
trade date, in conjunction with its current stock repurchase
program. For the year through February 14, 2014, 58,838
shares were repurchased under this program at a total cost of
$4.1 million. In
October 2011, Indemnity's Board of Directors approved a
continuation of the current stock repurchase program for a total of
$150 million, with no time
limitation. This repurchase authority included, and was not
in addition to, any unspent amounts remaining under the prior
authorization. As of February 14, 2014, Indemnity had
approximately $33 million in
repurchase authority remaining under the program.
According to A.M. Best Company, Erie Insurance Group, based in
Erie, Pennsylvania, is the 14th
largest homeowners insurer and 12th largest automobile insurer in
the United States based on direct
premiums written and the 18th 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 nearly 4.8 million policies in force and operates
in 11 states and the District of
Columbia. Erie Insurance Group is a FORTUNE 500 and Barron's
500 company. Erie Insurance is proud to have received the J.D.
Power and Associates' award for "Highest in Customer Satisfaction
with the Auto Insurance Purchase Experience." Erie Insurance is
also recognized on the list of Ward's 50 Group of top performing
insurance companies, which analyzes the financial performance of
3,000 property and casualty companies and recognizes the top
performers for achieving outstanding results in safety, consistency
and financial performance over a five-year period (2008-2012).
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, agency relationships, 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:
Risk factors related to the Indemnity shareholder interest:
- dependence on Indemnity's relationship with the Exchange and
the management fee under the agreement with the subscribers at the
Exchange;
- costs of providing services to the Exchange under the
subscriber's agreement;
- ability to attract and retain talented management and
employees;
- ability to maintain uninterrupted business operations;
- factors affecting the quality and liquidity of Indemnity's
investment portfolio;
- credit risk from the Exchange;
- Indemnity's ability to meet liquidity needs and access capital;
and
- outcome of pending and potential litigation against
Indemnity.
Risk factors related to the non-controlling interest owned by
the Exchange, which includes the Property and Casualty Group and
EFL:
- general business and economic conditions;
- dependence upon the independent agency system;
- ability to maintain our reputation for customer service;
- factors affecting insurance industry competition;
- changes in government regulation of the insurance
industry;
- premium rates and reserves must be established from forecasts
of ultimate costs;
- emerging claims, coverage issues in the industry, and changes
in reserve estimates related to the property and casualty
business;
- changes in reserve estimates related to the life business;
- severe weather conditions or other catastrophic losses,
including terrorism;
- the Exchange's ability to acquire reinsurance coverage and
collectability from reinsurers;
- factors affecting the quality and liquidity of the Exchange's
investment portfolio;
- the Exchange's ability to meet liquidity needs and access
capital;
- the Exchange's ability to maintain acceptable financial
strength rating;
- outcome of pending and potential litigation against the
Exchange; and
- dependence upon the service provided by Indemnity.
A forward-looking statement speaks only as of the date on which
it is made and reflects Indemnity's analysis only as of that date.
Indemnity undertakes 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
Consolidated
Statements of Operations
(dollars in
millions, except per share data)
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Three months
ended
December
31,
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Twelve months
ended
December
31,
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Revenues
|
|
(Unaudited)
|
|
|
Premiums
earned
|
|
$
|
1,267
|
|
|
$
|
1,160
|
|
|
$
|
4,898
|
|
|
$
|
4,493
|
|
Net investment
income
|
|
106
|
|
|
112
|
|
|
422
|
|
|
438
|
|
Net realized
investment gains
|
|
270
|
|
|
60
|
|
|
771
|
|
|
418
|
|
Net impairment losses
recognized in earnings
|
|
(3)
|
|
|
0
|
|
|
(13)
|
|
|
0
|
|
Equity in earnings of
limited partnerships
|
|
49
|
|
|
32
|
|
|
161
|
|
|
131
|
|
Other
income
|
|
8
|
|
|
8
|
|
|
32
|
|
|
32
|
|
Total
revenues
|
|
1,697
|
|
|
1,372
|
|
|
6,271
|
|
|
5,512
|
|
Benefits and
expenses
|
|
|
|
|
|
|
|
|
Insurance losses and
loss expenses
|
|
896
|
|
|
909
|
|
|
3,467
|
|
|
3,480
|
|
Policy acquisition
and underwriting expenses
|
|
331
|
|
|
298
|
|
|
1,237
|
|
|
1,133
|
|
Total benefits
and expenses
|
|
1,227
|
|
|
1,207
|
|
|
4,704
|
|
|
4,613
|
|
|
|
|
|
|
|
|
|
|
Income from
operations before income taxes and noncontrolling
interest
|
|
470
|
|
|
165
|
|
|
1,567
|
|
|
899
|
|
Provision for income
taxes
|
|
156
|
|
|
46
|
|
|
519
|
|
|
280
|
|
Net
income
|
|
$
|
314
|
|
|
$
|
119
|
|
|
$
|
1,048
|
|
|
$
|
619
|
|
|
|
|
|
|
|
|
|
|
Less: Net income
attributable to noncontrolling interest in
consolidated
entity –
Exchange
|
|
278
|
|
|
89
|
|
|
885
|
|
|
459
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to Indemnity
|
|
$
|
36
|
|
|
$
|
30
|
|
|
$
|
163
|
|
|
$
|
160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per
Share
|
|
|
|
|
|
|
|
|
Net income
attributable to Indemnity per share
|
|
|
|
|
|
|
|
|
Class A common
stock – basic
|
|
$
|
0.75
|
|
|
$
|
0.63
|
|
|
$
|
3.46
|
|
|
$
|
3.38
|
|
Class A
common stock – diluted
|
|
$
|
0.67
|
|
|
$
|
0.56
|
|
|
$
|
3.08
|
|
|
$
|
2.99
|
|
Class B common
stock – basic
|
|
$
|
113
|
|
|
$
|
94
|
|
|
$
|
520
|
|
|
$
|
505
|
|
Class B common
stock – diluted
|
|
$
|
113
|
|
|
$
|
94
|
|
|
$
|
519
|
|
|
$
|
505
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding attributable to Indemnity –
Basic
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
46,520,232
|
|
|
47,006,247
|
|
|
46,660,651
|
|
|
47,357,836
|
|
Class B common
stock
|
|
2,542
|
|
|
2,543
|
|
|
2,542
|
|
|
2,544
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding attributable to Indemnity –
Diluted
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
52,715,338
|
|
|
53,193,844
|
|
|
52,855,757
|
|
|
53,547,833
|
|
Class B common
stock
|
|
2,542
|
|
|
2,543
|
|
|
2,542
|
|
|
2,544
|
|
|
|
|
|
|
|
|
|
|
Dividends declared
per share
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
$
|
0.6350
|
|
|
$
|
2.5925
|
|
|
$
|
2.4125
|
|
|
$
|
4.2500
|
|
Class B common
stock
|
|
$
|
95.2500
|
|
|
$
|
388.8750
|
|
|
$
|
361.8750
|
|
|
$
|
637.5000
|
|
Erie Indemnity
Company
Results of the
Erie Insurance Group's Operations by Interest
(Unaudited)
(in
millions)
|
|
|
|
Indemnity
shareholder interest
|
|
Noncontrolling interest
(Exchange)
|
|
Eliminations of
related
party
transactions
|
Erie Insurance
Group
|
|
|
Three months
ended
December
31,
|
|
Three months
ended
December
31,
|
|
Three months
ended
December
31,
|
|
Three months
ended
December
31,
|
|
|
2013
|
2012
|
|
2013
|
2012
|
|
2013
|
2012
|
|
2013
|
2012
|
Management
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fee
revenue, net
|
|
$
|
301
|
|
$
|
275
|
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
(301)
|
|
$
|
(275)
|
|
|
$
|
—
|
|
$
|
—
|
|
Service agreement
revenue
|
|
8
|
|
8
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
8
|
|
8
|
|
Total revenue from
management operations
|
|
309
|
|
283
|
|
|
—
|
|
—
|
|
|
(301)
|
|
(275)
|
|
|
8
|
|
8
|
|
Cost of management
operations
|
|
268
|
|
249
|
|
|
—
|
|
—
|
|
|
(268)
|
|
(249)
|
|
|
—
|
|
—
|
|
Income from management operations before taxes
|
|
41
|
|
34
|
|
|
—
|
|
—
|
|
|
(33)
|
|
(26)
|
|
|
8
|
|
8
|
|
Property and
casualty insurance operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums
earned
|
|
—
|
|
—
|
|
|
1,247
|
|
1,143
|
|
|
—
|
|
—
|
|
|
1,247
|
|
1,143
|
|
Losses and loss
expenses
|
|
—
|
|
—
|
|
|
870
|
|
883
|
|
|
(1)
|
|
(1)
|
|
|
869
|
|
882
|
|
Policy acquisition
and underwriting expenses
|
|
—
|
|
—
|
|
|
355
|
|
321
|
|
|
(36)
|
|
(29)
|
|
|
319
|
|
292
|
|
Income (loss) from property and casualty
insurance
operations before taxes
|
|
—
|
|
—
|
|
|
22
|
|
(61)
|
|
|
37
|
|
30
|
|
|
59
|
|
(31)
|
|
Life insurance
operations: (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenue
|
|
—
|
|
—
|
|
|
53
|
|
45
|
|
|
0
|
|
(1)
|
|
|
53
|
|
44
|
|
Total benefits and
expenses
|
|
—
|
|
—
|
|
|
39
|
|
33
|
|
|
0
|
|
0
|
|
|
39
|
|
33
|
|
Income from life insurance operations before
taxes
|
|
—
|
|
—
|
|
|
14
|
|
12
|
|
|
0
|
|
(1)
|
|
|
14
|
|
11
|
|
Investment
operations: (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment
income
|
|
4
|
|
4
|
|
|
82
|
|
87
|
|
|
(4)
|
|
(3)
|
|
|
82
|
|
88
|
|
Net realized gains on
investments
|
|
0
|
|
1
|
|
|
261
|
|
56
|
|
|
—
|
|
—
|
|
|
261
|
|
57
|
|
Net impairment losses
recognized in earnings
|
|
0
|
|
0
|
|
|
(3)
|
|
0
|
|
|
—
|
|
—
|
|
|
(3)
|
|
0
|
|
Equity in earnings of
limited partnerships
|
|
9
|
|
5
|
|
|
40
|
|
27
|
|
|
—
|
|
—
|
|
|
49
|
|
32
|
|
Income from investment operations before taxes
|
|
13
|
|
10
|
|
|
380
|
|
170
|
|
|
(4)
|
|
(3)
|
|
|
389
|
|
177
|
|
Income from
operations before income taxes and
noncontrolling interest
|
|
54
|
|
44
|
|
|
416
|
|
121
|
|
|
—
|
|
—
|
|
|
470
|
|
165
|
|
Provision for income
taxes
|
|
18
|
|
14
|
|
|
138
|
|
32
|
|
|
—
|
|
—
|
|
|
156
|
|
46
|
|
Net
income
|
|
$
|
36
|
|
$
|
30
|
|
|
$
|
278
|
|
$
|
89
|
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
314
|
|
$
|
119
|
|
|
|
(1)
|
Earnings on life
insurance related invested assets are integral to the evaluation of
the life insurance operations because of the long duration of life
products. On that basis, for presentation purposes, the life
insurance operations in the table above include life insurance
related investment results.
|
Erie Indemnity
Company
Results of the
Erie Insurance Group's Operations by Interest
(in
millions)
|
|
|
|
Indemnity
shareholder interest
|
|
Noncontrolling interest
(Exchange)
|
|
Eliminations of
related
party
transactions
|
Erie Insurance
Group
|
|
|
Years
ended
December
31,
|
|
Years
ended
December
31,
|
|
Years
ended
December
31,
|
|
Years
ended
December
31,
|
|
|
2013
|
2012
|
|
2013
|
2012
|
|
2013
|
2012
|
|
2013
|
2012
|
Management
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fee
revenue, net
|
|
$
|
1,266
|
|
$
|
1,157
|
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
(1,266)
|
|
$
|
(1,157)
|
|
|
$
|
—
|
|
$
|
—
|
|
Service agreement
revenue
|
|
31
|
|
31
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
31
|
|
31
|
|
Total revenue from
management operations
|
|
1,297
|
|
1,188
|
|
|
—
|
|
—
|
|
|
(1,266)
|
|
(1,157)
|
|
|
31
|
|
31
|
|
Cost of management
operations
|
|
1,088
|
|
983
|
|
|
—
|
|
—
|
|
|
(1,088)
|
|
(983)
|
|
|
—
|
|
—
|
|
Income from management operations before taxes
|
|
209
|
|
205
|
|
|
—
|
|
—
|
|
|
(178)
|
|
(174)
|
|
|
31
|
|
31
|
|
Property and
casualty insurance operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums
earned
|
|
—
|
|
—
|
|
|
4,820
|
|
4,422
|
|
|
—
|
|
—
|
|
|
4,820
|
|
4,422
|
|
Losses and loss
expenses
|
|
—
|
|
—
|
|
|
3,365
|
|
3,384
|
|
|
(5)
|
|
(5)
|
|
|
3,360
|
|
3,379
|
|
Policy acquisition
and underwriting expenses
|
|
—
|
|
—
|
|
|
1,387
|
|
1,284
|
|
|
(187)
|
|
(182)
|
|
|
1,200
|
|
1,102
|
|
Income (loss) from property and casualty
insurance
operations
before taxes
|
|
—
|
|
—
|
|
|
68
|
|
(246)
|
|
|
192
|
|
187
|
|
|
260
|
|
(59)
|
|
Life insurance
operations: (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenue
|
|
—
|
|
—
|
|
|
192
|
|
178
|
|
|
(2)
|
|
(2)
|
|
|
190
|
|
176
|
|
Total benefits and
expenses
|
|
—
|
|
—
|
|
|
144
|
|
132
|
|
|
0
|
|
0
|
|
|
144
|
|
132
|
|
Income from life insurance operations before
taxes
|
|
—
|
|
—
|
|
|
48
|
|
46
|
|
|
(2)
|
|
(2)
|
|
|
46
|
|
44
|
|
Investment
operations: (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment
income
|
|
15
|
|
16
|
|
|
325
|
|
338
|
|
|
(12)
|
|
(11)
|
|
|
328
|
|
343
|
|
Net realized gains on
investments
|
|
1
|
|
5
|
|
|
753
|
|
404
|
|
|
—
|
|
—
|
|
|
754
|
|
409
|
|
Net impairment losses
recognized in earnings
|
|
0
|
|
0
|
|
|
(12)
|
|
0
|
|
|
—
|
|
—
|
|
|
(12)
|
|
0
|
|
Equity in earnings of
limited partnerships
|
|
22
|
|
15
|
|
|
138
|
|
116
|
|
|
—
|
|
—
|
|
|
160
|
|
131
|
|
Income from investment operations before taxes
|
|
38
|
|
36
|
|
|
1,204
|
|
858
|
|
|
(12)
|
|
(11)
|
|
|
1,230
|
|
883
|
|
Income from
operations before income taxes and
noncontrolling interest
|
|
247
|
|
241
|
|
|
1,320
|
|
658
|
|
|
—
|
|
—
|
|
|
1,567
|
|
899
|
|
Provision for income
taxes
|
|
84
|
|
81
|
|
|
435
|
|
199
|
|
|
—
|
|
—
|
|
|
519
|
|
280
|
|
Net
income
|
|
$
|
163
|
|
$
|
160
|
|
|
$
|
885
|
|
$
|
459
|
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
1,048
|
|
$
|
619
|
|
|
|
(1)
|
Earnings on life
insurance related invested assets are integral to the evaluation of
the life insurance operations because of the long duration of life
products. On that basis, for presentation purposes, the life
insurance operations in the table above include life insurance
related investment results.
|
Erie Indemnity Company
Reconciliation of Operating
Income to Net Income
Reconciliation of operating income to net income
We disclose operating income, a non-GAAP financial measure, to
enhance our investors' understanding of our performance related to
the Indemnity shareholder interest. Our method of calculating
this measure may differ from those used by other companies, and
therefore comparability may be limited.
Indemnity defines operating income as net income excluding
realized capital gains and losses, impairment losses and related
federal income taxes.
Indemnity uses operating income to evaluate the results of its
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 Indemnity's overall
profitability.
The following table reconciles operating income and net income
for the Indemnity shareholder interest:
|
|
Indemnity Shareholder
Interest
|
|
|
Three months
ended
December
31,
|
|
Years
ended
December
31,
|
(in millions, except per share data)
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
(Unaudited)
|
|
|
Operating income
attributable to Indemnity
|
|
$
|
36
|
|
|
$
|
29
|
|
|
$
|
162
|
|
|
$
|
157
|
|
Net realized gains
and impairments on investments
|
|
0
|
|
|
1
|
|
|
1
|
|
|
5
|
|
Income tax
expense
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(2)
|
|
Realized gains
and impairments, net of income taxes
|
|
0
|
|
|
1
|
|
|
1
|
|
|
3
|
|
Net income
attributable to Indemnity
|
|
$
|
36
|
|
|
$
|
30
|
|
|
$
|
163
|
|
|
$
|
160
|
|
|
|
|
|
|
|
|
|
|
Per Indemnity
Class A common share-diluted:
|
|
|
|
|
|
|
|
|
Operating income
attributable to Indemnity
|
|
$
|
0.67
|
|
|
$
|
0.54
|
|
|
$
|
3.07
|
|
|
$
|
2.92
|
|
Net realized gains
and impairments on investments
|
|
0.00
|
|
|
0.02
|
|
|
0.01
|
|
|
0.10
|
|
Income tax
expense
|
|
0.00
|
|
|
0.00
|
|
|
0.00
|
|
|
(0.03)
|
|
Realized gains
and impairments, net of income taxes
|
|
0.00
|
|
|
0.02
|
|
|
0.01
|
|
|
0.07
|
|
Net income
attributable to Indemnity
|
|
$
|
0.67
|
|
|
$
|
0.56
|
|
|
$
|
3.08
|
|
|
$
|
2.99
|
|
Erie Indemnity
Company
Consolidated
Statements of Financial Position
(in
millions)
|
|
|
|
December 31,
2013
|
|
December 31,
2012
|
|
|
|
|
|
Assets
|
|
|
|
|
Investments –
Indemnity
|
|
|
|
|
Available-for-sale
securities, at fair value:
|
|
|
|
|
Fixed
maturities
|
|
$
|
526
|
|
|
$
|
452
|
|
Equity
securities
|
|
50
|
|
|
55
|
|
Limited
partnerships
|
|
146
|
|
|
180
|
|
Other invested
assets
|
|
1
|
|
|
1
|
|
Investments –
Exchange
|
|
|
|
|
Available-for-sale
securities, at fair value:
|
|
|
|
|
Fixed
maturities
|
|
8,162
|
|
|
7,707
|
|
Equity
securities
|
|
819
|
|
|
945
|
|
Trading securities,
at fair value
|
|
3,202
|
|
|
2,417
|
|
Limited
partnerships
|
|
940
|
|
|
1,037
|
|
Other invested
assets
|
|
20
|
|
|
20
|
|
Total investments
|
|
13,866
|
|
|
12,814
|
|
|
|
|
|
|
Cash and cash
equivalents (Exchange portion of $403 and $388,
respectively)
|
|
452
|
|
|
400
|
|
Premiums receivable
from policyholders – Exchange
|
|
1,167
|
|
|
1,062
|
|
Reinsurance
recoverable – Exchange
|
|
172
|
|
|
168
|
|
Deferred income taxes
– Indemnity
|
|
2
|
|
|
37
|
|
Deferred acquisition
costs – Exchange
|
|
566
|
|
|
504
|
|
Other assets
(Exchange portion of $337 and $339, respectively)
|
|
451
|
|
|
456
|
|
Total assets
|
|
$
|
16,676
|
|
|
$
|
15,441
|
|
|
|
|
|
|
Liabilities and
shareholders' equity
|
|
|
|
|
Liabilities
|
|
|
|
|
Indemnity
liabilities
|
|
|
|
|
Other
liabilities
|
|
$
|
476
|
|
|
$
|
515
|
|
Exchange
liabilities
|
|
|
|
|
Losses
and loss expense reserves
|
|
3,747
|
|
|
3,598
|
|
Life
policy and deposit contract reserves
|
|
1,758
|
|
|
1,708
|
|
Unearned
premiums
|
|
2,598
|
|
|
2,365
|
|
Deferred
income taxes
|
|
450
|
|
|
365
|
|
Other
liabilities
|
|
97
|
|
|
99
|
|
Total liabilities
|
|
9,126
|
|
|
8,650
|
|
|
|
|
|
|
Indemnity's
shareholders' equity
|
|
734
|
|
|
642
|
|
|
|
|
|
|
Noncontrolling
interest in consolidated entity – Exchange
|
|
6,816
|
|
|
6,149
|
|
Total equity
|
|
7,550
|
|
|
6,791
|
|
Total liabilities, shareholders' equity and
noncontrolling interest
|
|
$
|
16,676
|
|
|
$
|
15,441
|
|
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SOURCE Erie Indemnity Company