ERIE, Pa., Feb. 25, 2016
/PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for
the full year and the quarter ending December 31, 2015.
Net income was $174.7 million, or
$3.33 per diluted share, for the full
year 2015, compared to $167.5
million, or $3.18 per diluted
share, in 2014. Net income was $30.1
million, or $0.57 per diluted
share, in the fourth quarter of 2015, compared to $25.3 million, or $0.48 per diluted share, in the fourth quarter of
2014. The growth in 2015 for the fourth quarter and full year
was driven by increased net revenue from operations and increased
investment income, primarily due to an increase in earnings from
limited partnerships.
"The strong results we saw in 2015, our 90th year in
business, reflect our continued commitment to and execution of our
business strategy that will provide long-term value for our
customers and shareholders," said Terry
Cavanaugh, President and CEO.
4Q and Total Year
2015
|
|
(dollars in
thousands)
|
4Q'14
|
4Q'15
|
|
2014
|
2015
|
|
|
Net revenue from
operations
|
$
|
35,413
|
|
$
|
41,839
|
|
|
$
|
222,847
|
|
$
|
232,541
|
|
|
|
Investment
income
|
2,342
|
|
4,244
|
|
|
28,417
|
|
33,708
|
|
|
|
Income before income
taxes
|
37,755
|
|
46,083
|
|
|
251,264
|
|
266,249
|
|
|
|
Income tax
expense
|
12,459
|
|
15,950
|
|
|
83,759
|
|
91,571
|
|
|
|
Net income
|
$
|
25,296
|
|
$
|
30,133
|
|
|
$
|
167,505
|
|
$
|
174,678
|
|
|
|
Gross margin from
operations
|
10.5
|
%
|
11.7
|
%
|
|
15.8
|
%
|
15.4
|
%
|
|
|
2015 Total Year
Highlights
|
Net revenue from operations before taxes increased $9.7 million, or 4.3 percent, in 2015 compared to
2014.
- Management fee revenue increased $99.3
million, or 7.2 percent, in 2015 compared to
2014.
- Commissions increased $64.9
million in 2015 compared to 2014. The majority of the
increase was driven by the 7.3 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 increased $23.8
million in 2015 compared to 2014. Underwriting and
policy processing costs increased $8.0
million due to increased personnel and postage costs.
Information technology costs increased $2.3
million primarily due to hardware and software costs.
Sales and advertising costs increased $4.1
million primarily due to personnel costs. Customer
service costs increased $2.8 million
due to an increase in personnel costs and credit card processing
fees. Administrative and other costs increased $6.6 million due to personnel costs and
professional fees. Personnel costs in all expense categories
were impacted by increased pension and medical costs, and increased
estimates for incentive plan compensation costs related to
underwriting performance.
- The gross margin for 2015 was 15.4 percent, compared to 15.8
percent for 2014. The 0.4 point decrease in gross margin was
driven primarily by the increased agent incentive costs discussed
above.
Income from investments before taxes totaled $33.7 million in 2015, compared to $28.4 million in 2014. Earnings from
limited partnerships were $17.0
million in 2015 compared to earnings of $10.9 million in 2014.
Net revenue from operations before taxes increased $6.4 million, or 18.1 percent, in the fourth
quarter of 2015 compared to the fourth quarter of 2014.
- Management fee revenue increased $19.5
million, or 5.9 percent, in the fourth quarter of 2015
compared to the fourth quarter of 2014.
- Commissions increased $11.2
million in the fourth quarter of 2015, compared to the
fourth quarter of 2014. The majority of the increase was
driven by the 6.2 percent increase in direct and assumed premiums
written by the Exchange.
- Non-commission expense increased $1.5
million in the fourth quarter of 2015 compared to the fourth
quarter of 2014. Underwriting and policy processing costs
increased $1.7 million due to
increased personnel costs. Sales and advertising costs
increased $1.7 million due to
increased personnel and advertising costs. Administrative and
other expenses decreased $2.0 million
due to professional fees. All other operating costs increased
$0.1 million.
- The gross margin in the fourth quarter of 2015 was 11.7
percent, compared to 10.5 percent in the fourth quarter of
2014.
Income from investments before taxes totaled $4.2 million in the fourth quarter of 2015,
compared to $2.3 million in the
fourth quarter of 2014. Earnings from limited partnerships
were $0.1 million in the fourth
quarter of 2015 compared to losses of $1.7
million in the fourth quarter of 2014.
Webcast Information
Indemnity has scheduled a conference call and live audio
broadcast on the Web for 10:00 AM ET on February 26,
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.
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, a
Barron's 500 company and has been recognized by Forbes as one of
America's 50 Most Trustworthy Financial Companies.
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, 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:
- dependence upon our 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;
- credit risk from the Exchange;
- dependence upon our relationship with the Exchange and the
growth of the Exchange, including:
- general business and economic conditions;
- factors affecting insurance industry competition;
- dependence upon the independent agency system; and
- ability to maintain our reputation for customer service;
- dependence upon our relationship with the Exchange and the
financial condition of the Exchange, including:
- the Exchange's ability to maintain acceptable financial
strength ratings;
- factors affecting the quality and liquidity of the Exchange's
investment portfolio;
- changes in government regulation of the insurance
industry;
- emerging claims and coverage issues in the industry; and
- severe weather conditions or other catastrophic losses,
including terrorism;
- ability to attract and retain talented management and
employees;
- ability to maintain uninterrupted business operations;
- factors affecting the quality and liquidity of our investment
portfolio;
- our ability to meet liquidity needs and access capital;
and
- outcome of pending and potential litigation.
A forward-looking statement speaks only as of the date on which
it is made and reflects our analysis only as of that date. We
undertake 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-F)
Erie Indemnity
Company
|
Statements of
Operations
|
(dollars in
thousands, except per share data)
|
|
|
|
Three months
ended
December 31,
|
|
Twelve months
ended
December 31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
(Unaudited)
|
|
|
|
|
Operating
revenue
|
|
|
|
|
|
|
|
|
Management fee
revenue, net
|
|
$
|
348,885
|
|
|
$
|
329,382
|
|
|
$
|
1,475,511
|
|
|
$
|
1,376,190
|
|
Service agreement
revenue
|
|
7,495
|
|
|
7,874
|
|
|
29,997
|
|
|
30,929
|
|
Total operating
revenue
|
|
356,380
|
|
|
337,256
|
|
|
1,505,508
|
|
|
1,407,119
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Commissions
|
|
206,691
|
|
|
195,499
|
|
|
847,880
|
|
|
783,017
|
|
Salaries and employee
benefits
|
|
55,998
|
|
|
53,417
|
|
|
226,713
|
|
|
206,690
|
|
All other operating
expenses
|
|
51,852
|
|
|
52,927
|
|
|
198,374
|
|
|
194,565
|
|
Total operating
expenses
|
|
314,541
|
|
|
301,843
|
|
|
1,272,967
|
|
|
1,184,272
|
|
Net revenue from
operations
|
|
41,839
|
|
|
35,413
|
|
|
232,541
|
|
|
222,847
|
|
|
|
|
|
|
|
|
|
|
Investment
income
|
|
|
|
|
|
|
|
|
Net investment
income
|
|
4,469
|
|
|
4,312
|
|
|
17,791
|
|
|
16,536
|
|
Net realized gains
(losses) on investments
|
|
617
|
|
|
(237)
|
|
|
492
|
|
|
1,057
|
|
Net impairment losses
recognized in earnings
|
|
(923)
|
|
|
0
|
|
|
(1,558)
|
|
|
(105)
|
|
Equity in earnings
(losses) of limited partnerships
|
|
81
|
|
|
(1,733)
|
|
|
16,983
|
|
|
10,929
|
|
Total investment
income
|
|
4,244
|
|
|
2,342
|
|
|
33,708
|
|
|
28,417
|
|
Income before income
taxes
|
|
46,083
|
|
|
37,755
|
|
|
266,249
|
|
|
251,264
|
|
Income tax
expense
|
|
15,950
|
|
|
12,459
|
|
|
91,571
|
|
|
83,759
|
|
Net
income
|
|
$
|
30,133
|
|
|
$
|
25,296
|
|
|
$
|
174,678
|
|
|
$
|
167,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per
Share
|
|
|
|
|
|
|
|
|
Net income per
share
|
|
|
|
|
|
|
|
|
Class A common
stock – basic
|
|
$
|
0.65
|
|
|
$
|
0.54
|
|
|
$
|
3.75
|
|
|
$
|
3.59
|
|
Class A
common stock – diluted
|
|
$
|
0.57
|
|
|
$
|
0.48
|
|
|
$
|
3.33
|
|
|
$
|
3.18
|
|
Class B common
stock – basic
|
|
$
|
97
|
|
|
$
|
81
|
|
|
$
|
563
|
|
|
$
|
539
|
|
Class B
common stock – diluted
|
|
$
|
97
|
|
|
$
|
81
|
|
|
$
|
562
|
|
|
$
|
538
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – Basic
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
46,179,559
|
|
|
46,189,068
|
|
|
46,186,671
|
|
|
46,247,876
|
|
Class B common
stock
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – Diluted
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
52,506,600
|
|
|
52,601,010
|
|
|
52,498,811
|
|
|
52,616,234
|
|
Class B common
stock
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
|
|
|
|
|
|
|
|
Dividends declared
per share
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
$
|
0.730
|
|
|
$
|
0.681
|
|
|
$
|
2.773
|
|
|
$
|
2.586
|
|
Class B common
stock
|
|
$
|
109.50
|
|
|
$
|
102.15
|
|
|
$
|
415.95
|
|
|
$
|
387.90
|
|
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. Our
method of calculating this measure may differ from those used by
other companies, and therefore comparability may be limited.
We define operating income as net income excluding realized
capital gains and losses, impairment losses, and related federal
income taxes.
We use operating income to evaluate the results of our
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 our overall
profitability.
The following table reconciles operating income and net income
for the years ended December 31:
|
|
Three months
ended
December 31,
|
|
Twelve months
ended
December 31,
|
(in thousands, except per share data)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
(Unaudited)
|
|
|
Operating
income
|
|
$
|
30,332
|
|
|
$
|
25,449
|
|
|
$
|
175,371
|
|
|
$
|
166,886
|
|
Net realized (losses)
gains and impairments on investments
|
|
(306)
|
|
|
(237)
|
|
|
(1,066)
|
|
|
952
|
|
Income tax benefit
(expense)
|
|
107
|
|
|
84
|
|
|
373
|
|
|
(333)
|
|
Realized (losses)
gains and impairments, net of income taxes
|
|
(199)
|
|
|
(153)
|
|
|
(693)
|
|
|
619
|
|
Net
income
|
|
$
|
30,133
|
|
|
$
|
25,296
|
|
|
$
|
174,678
|
|
|
$
|
167,505
|
|
|
|
|
|
|
|
|
|
|
Per Class A
common share-diluted:
|
|
|
|
|
|
|
|
|
Operating
income
|
|
$
|
0.58
|
|
|
$
|
0.48
|
|
|
$
|
3.34
|
|
|
$
|
3.17
|
|
Net realized (losses)
gains and impairments on investments
|
|
(0.01)
|
|
|
0.00
|
|
|
(0.02)
|
|
|
0.02
|
|
Income tax benefit
(expense)
|
|
0.00
|
|
|
0.00
|
|
|
0.01
|
|
|
(0.01)
|
|
Realized (losses)
gains and impairments, net of income taxes
|
|
(0.01)
|
|
|
0.00
|
|
|
(0.01)
|
|
|
0.01
|
|
Net
income
|
|
$
|
0.57
|
|
|
$
|
0.48
|
|
|
$
|
3.33
|
|
|
$
|
3.18
|
|
Erie Indemnity
Company
|
Statements of
Financial Position
|
(in
thousands)
|
|
|
|
December 31,
2015
|
|
December 31,
2014
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
182,889
|
|
|
$
|
91,747
|
|
Short-term
investments
|
|
62,067
|
|
|
63,278
|
|
Receivables from Erie
Insurance Exchange and affiliates
|
|
348,055
|
|
|
335,220
|
|
Prepaid expenses and
other current assets
|
|
24,697
|
|
|
26,020
|
|
Federal income taxes
recoverable
|
|
11,947
|
|
|
11,448
|
|
Accrued investment
income
|
|
5,491
|
|
|
5,538
|
|
Total current
assets
|
|
635,146
|
|
|
533,251
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
537,874
|
|
|
526,492
|
|
Limited partnership
investments
|
|
88,535
|
|
|
112,617
|
|
Fixed assets,
net
|
|
59,087
|
|
|
62,991
|
|
Deferred income
taxes, net
|
|
40,686
|
|
|
37,321
|
|
Note receivable from
Erie Family Life Insurance Company
|
|
25,000
|
|
|
25,000
|
|
Other
assets
|
|
20,968
|
|
|
21,526
|
|
Total
assets
|
|
$
|
1,407,296
|
|
|
$
|
1,319,198
|
|
|
|
|
|
|
Liabilities and
shareholders' equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Commissions
payable
|
|
$
|
195,542
|
|
|
$
|
189,918
|
|
Agent
bonuses
|
|
106,752
|
|
|
88,228
|
|
Accrued expenses and
other current liabilities
|
|
42,006
|
|
|
39,560
|
|
Accounts
payable
|
|
46,526
|
|
|
35,844
|
|
Dividends
payable
|
|
33,996
|
|
|
31,714
|
|
Deferred executive
compensation
|
|
20,877
|
|
|
14,891
|
|
Total current
liabilities
|
|
445,699
|
|
|
400,155
|
|
|
|
|
|
|
Defined benefit
pension plan
|
|
172,700
|
|
|
188,820
|
|
Employee benefit
obligations
|
|
1,234
|
|
|
1,889
|
|
Deferred executive
compensation
|
|
16,580
|
|
|
24,087
|
|
Other long-term
liabilities
|
|
1,580
|
|
|
1,113
|
|
Total
liabilities
|
|
637,793
|
|
|
616,064
|
|
|
|
|
|
|
Shareholders'
equity
|
|
769,503
|
|
|
703,134
|
|
Total liabilities
and shareholders' equity
|
|
$
|
1,407,296
|
|
|
$
|
1,319,198
|
|
Logo - http://photos.prnewswire.com/prnh/20041112/ERIELOGO
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/erie-indemnity-reports-full-year-and-fourth-quarter-2015-results-300225494.html
SOURCE Erie Indemnity Company