ERIE, Pa., April 28, 2016
/PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for
the quarter ending March 31, 2016. Net income was
$45.9 million, or $0.87 per diluted share, in the first quarter of
2016, compared to $38.8 million, or
$0.74 per diluted share, in the first
quarter of 2015. The growth in the first quarter of 2016 was
driven by increased net revenue from operations.
"Strong topline growth together with prudent expense management
resulted in solid earnings per share for the quarter," said
Terry Cavanaugh, President and
CEO.
1Q
2016
|
|
(dollars in
thousands)
|
1Q'15
|
|
1Q'16
|
|
|
Net revenue from
operations
|
$
|
52,430
|
|
$
|
67,665
|
|
|
Investment
income
|
6,539
|
|
2,559
|
|
|
Income before income
taxes
|
58,969
|
|
70,224
|
|
|
Income tax
expense
|
20,136
|
|
24,329
|
|
|
Net income
|
$
|
38,833
|
|
$
|
45,895
|
|
|
Gross margin from
operations
|
14.9
|
%
|
18.1
|
%
|
|
Net revenue from operations before taxes increased $15.2 million, or 29.1 percent, in the first
quarter of 2016 compared to the first quarter of 2015.
- Management fee revenue increased $24.2
million, or 7.1 percent, in the first quarter of 2016
compared to the first quarter of 2015.
- Commissions increased $15.0
million in the first quarter of 2016 compared to the first
quarter of 2015, primarily as a result of the 7.1 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, compared to
the prior year quarter.
- Non-commission expense decreased $6.3
million in the first quarter of 2016 compared to the first
quarter of 2015. Underwriting and policy processing costs increased
$1.0 million due to increased
personnel costs. Information technology costs decreased
$4.7 million primarily due to
decreased professional fees. Administrative and other costs
decreased $2.6 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 quarter of 2016 was 18.1 percent
compared to 14.9 percent in the first quarter of 2015.
Income from investments before taxes totaled $2.6 million in the first quarter of 2016
compared to $6.5 million in the
first quarter of 2015. Losses from limited partnerships were
$0.7 million in the first quarter of
2016 compared to earnings of $2.4
million in the first quarter of 2015.
Webcast Information
Indemnity has scheduled a conference call and live audio
broadcast on the Web for 10:00 AM ET on April 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.
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 16th 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 Erie Insurance
Exchange ("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
March 31,
|
|
|
2016
|
|
|
2015
|
|
|
|
(Unaudited)
|
|
Operating
revenue
|
|
|
|
|
Management fee
revenue, net
|
|
$
|
367,458
|
|
|
$
|
343,234
|
|
Service agreement
revenue
|
|
7,270
|
|
|
7,597
|
|
Total operating
revenue
|
|
374,728
|
|
|
350,831
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
Commissions
|
|
208,714
|
|
|
193,717
|
|
Salaries and employee
benefits
|
|
53,289
|
|
|
55,019
|
|
All other operating
expenses
|
|
45,060
|
|
|
49,665
|
|
Total operating
expenses
|
|
307,063
|
|
|
298,401
|
|
Net revenue from
operations
|
|
67,665
|
|
|
52,430
|
|
|
|
|
|
|
Investment
income
|
|
|
|
|
Net investment
income
|
|
4,662
|
|
|
4,541
|
|
Net realized
investment losses
|
|
(1,088)
|
|
|
(240)
|
|
Net impairment losses
recognized in earnings
|
|
(345)
|
|
|
(120)
|
|
Equity in (losses)
earnings of limited partnerships
|
|
(670)
|
|
|
2,358
|
|
Total investment
income
|
|
2,559
|
|
|
6,539
|
|
Income before income
taxes
|
|
70,224
|
|
|
58,969
|
|
Income tax
expense
|
|
24,329
|
|
|
20,136
|
|
Net
income
|
|
$
|
45,895
|
|
|
$
|
38,833
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per
Share
|
|
|
|
|
Net income per
share
|
|
|
|
|
Class A common
stock – basic
|
|
$
|
0.99
|
|
|
$
|
0.83
|
|
Class A
common stock – diluted
|
|
$
|
0.87
|
|
|
$
|
0.74
|
|
Class B common
stock – basic and diluted
|
|
$
|
148
|
|
|
$
|
125
|
|
|
|
|
|
|
Weighted average
shares outstanding – Basic
|
|
|
|
|
Class A common
stock
|
|
46,189,068
|
|
|
46,189,068
|
|
Class B common
stock
|
|
2,542
|
|
|
2,542
|
|
|
|
|
|
|
Weighted average
shares outstanding – Diluted
|
|
|
|
|
Class A common
stock
|
|
52,523,927
|
|
|
52,634,752
|
|
Class B common
stock
|
|
2,542
|
|
|
2,542
|
|
|
|
|
|
|
Dividends declared
per share
|
|
|
|
|
Class A common
stock
|
|
$
|
0.730
|
|
|
$
|
0.681
|
|
Class B common
stock
|
|
$
|
109.500
|
|
|
$
|
102.150
|
|
|
|
|
|
|
|
|
|
|
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:
|
|
Three months ended
March 31,
|
|
(in thousands, except per share data)
|
|
2016
|
|
|
2015
|
|
|
|
(Unaudited)
|
|
Operating
income
|
|
$
|
46,827
|
|
|
$
|
39,067
|
|
Net realized losses
and impairments on investments
|
|
(1,433)
|
|
|
(360)
|
|
Income tax
benefit
|
|
501
|
|
|
126
|
|
Realized losses and
impairments, net of income taxes
|
|
(932)
|
|
|
(234)
|
|
Net
income
|
|
$
|
45,895
|
|
|
$
|
38,833
|
|
|
|
|
|
|
|
|
Per Class A
common share-diluted:
|
|
|
|
|
|
|
Operating
income
|
|
$
|
0.89
|
|
|
$
|
0.74
|
|
Net realized losses
and impairments on investments
|
|
(0.03)
|
|
|
0.00
|
|
Income tax
benefit
|
|
0.01
|
|
|
0.00
|
|
Realized losses and
impairments, net of income taxes
|
|
(0.02)
|
|
|
0.00
|
|
Net
income
|
|
$
|
0.87
|
|
|
$
|
0.74
|
|
Erie Indemnity
Company
Statements of
Financial Position
|
|
(in
thousands)
|
|
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
105,282
|
|
|
$
|
182,889
|
|
Available for sale
securities
|
|
54,285
|
|
|
62,067
|
|
Trading
securities
|
|
2,955
|
|
|
—
|
|
Receivables from Erie
Insurance Exchange and affiliates
|
|
352,451
|
|
|
348,055
|
|
Prepaid expenses and
other current assets
|
|
37,164
|
|
|
24,697
|
|
Federal income taxes
recoverable
|
|
0
|
|
|
11,947
|
|
Accrued investment
income
|
|
5,832
|
|
|
5,491
|
|
Total current
assets
|
|
557,969
|
|
|
635,146
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
560,928
|
|
|
537,874
|
|
Limited partnership
investments
|
|
82,912
|
|
|
88,535
|
|
Fixed assets,
net
|
|
58,918
|
|
|
59,087
|
|
Deferred income
taxes, net
|
|
35,250
|
|
|
40,686
|
|
Note receivable from
Erie Family Life Insurance Company
|
|
25,000
|
|
|
25,000
|
|
Other
assets
|
|
19,647
|
|
|
20,968
|
|
Total
assets
|
|
$
|
1,340,624
|
|
|
$
|
1,407,296
|
|
|
|
|
|
|
|
|
Liabilities and
shareholders' equity
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Commissions
payable
|
|
$
|
202,816
|
|
|
$
|
195,542
|
|
Agent
bonuses
|
|
31,940
|
|
|
106,752
|
|
Accounts payable and
accrued liabilities
|
|
79,333
|
|
|
88,532
|
|
Dividends
payable
|
|
33,996
|
|
|
33,996
|
|
Deferred executive
compensation
|
|
15,132
|
|
|
20,877
|
|
Federal income taxes
payable
|
|
8,541
|
|
|
0
|
|
Total current
liabilities
|
|
371,758
|
|
|
445,699
|
|
|
|
|
|
|
|
|
Defined benefit
pension plans
|
|
162,981
|
|
|
172,700
|
|
Employee benefit
obligations
|
|
1,072
|
|
|
1,234
|
|
Deferred executive
compensation
|
|
18,446
|
|
|
16,580
|
|
Other long-term
liabilities
|
|
1,500
|
|
|
1,580
|
|
Total
liabilities
|
|
555,757
|
|
|
637,793
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
784,867
|
|
|
769,503
|
|
Total liabilities
and shareholders' equity
|
|
$
|
1,340,624
|
|
|
$
|
1,407,296
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/erie-indemnity-reports-first-quarter-2016-results-300259742.html
SOURCE Erie Indemnity Company