ERIE, Pa., Feb. 23, 2017
/PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for
the full year and quarter ending December 31, 2016. Net
income was $210.4 million, or
$4.01 per diluted share, for the full
year 2016, compared to $174.7
million, or $3.33 per diluted
share, in 2015. Net income was $45.8
million, or $0.87 per diluted
share, in the fourth quarter of 2016, compared to $30.1 million, or $0.57 per diluted share, in the fourth quarter of
2015. The growth in 2016 for the fourth quarter and full year
was driven by increased net revenue from operations as revenue
growth outpaced the growth in expenses.
"We continue to grow profitably," said Tim NeCastro, President and CEO. "The
dedicated work of our Agents and Employees has once again enabled
us to beat the industry forecast for 2016 and as we embark upon
2017, we are well positioned for continued long-term growth and
value creation."
4Q and Total Year
2016
|
(dollars in
thousands)
|
4Q'15
|
4Q'16
|
|
2015
|
2016
|
|
|
Net revenue from
operations
|
$
|
41,839
|
|
$
|
56,685
|
|
|
$
|
232,541
|
|
$
|
292,364
|
|
|
|
Investment income,
net of interest expense
|
4,244
|
|
13,438
|
|
|
33,708
|
|
27,727
|
|
|
|
Income before income
taxes
|
46,083
|
|
70,123
|
|
|
266,249
|
|
320,091
|
|
|
|
Income tax
expense
|
15,950
|
|
24,337
|
|
|
91,571
|
|
109,725
|
|
|
|
Net income
|
$
|
30,133
|
|
$
|
45,786
|
|
|
$
|
174,678
|
|
$
|
210,366
|
|
|
|
Gross margin from
operations
|
11.7
|
%
|
14.9
|
%
|
|
15.4
|
%
|
18.3
|
%
|
|
|
2016 Total Year
Highlights
|
Net revenue from operations before taxes increased $59.8 million, or 25.7 percent, in 2016 compared
to 2015.
- Management fee revenue increased $91.9
million, or 6.2 percent, in 2016 compared to 2015.
- Commissions increased $45.9
million in 2016 compared to 2015 as a result of the 6.2
percent increase in direct and assumed premiums written by the
Exchange.
- Non-commission expense decreased $14.6
million in 2016 compared to 2015. Information technology
costs decreased $2.1 million
primarily due to decreased personnel costs somewhat offset by an
increase in professional fees. Customer service costs decreased
$4.7 million primarily due to
decreased credit card processing fees and personnel costs.
Administrative and other costs decreased $7.8 million due to decreased personnel costs,
including incentive compensation forfeited by senior executives who
separated from service during 2016, somewhat offset by an increase
in professional fees. Personnel costs in all expense categories
were impacted by decreased pension costs primarily due to an
increase in the pension discount rate as well as decreased medical
costs.
- The gross margin for 2016 was 18.3 percent, compared to 15.4
percent for 2015.
Income from investments before taxes totaled $27.8 million in 2016, compared to $33.7 million in 2015. Earnings from
limited partnerships were $7.0
million in 2016 compared to earnings of $17.0 million in 2015.
Net revenue from operations before taxes increased $14.8 million, or 35.5 percent, in the fourth
quarter of 2016 compared to the fourth quarter of 2015.
- Management fee revenue increased $23.3
million, or 6.7 percent, in the fourth quarter of 2016
compared to the fourth quarter of 2015.
- Commissions increased $10.1
million in the fourth quarter of 2016 compared to the fourth
quarter of 2015 as a result of the 6.4 percent increase in direct
and assumed premiums written by the Exchange.
- Non-commission expense decreased $1.8
million in the fourth quarter of 2016 compared to the fourth
quarter of 2015. Information technology costs increased
$4.3 million primarily due to an
increase in professional fees. Customer service costs decreased
$1.8 million primarily due to
decreased credit card processing fees and personnel costs.
Administrative and other costs decreased $4.0 million due to decreased personnel costs,
including incentive compensation forfeited by senior executives who
separated from service during 2016, somewhat offset by an increase
in professional fees. 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 fourth quarter of 2016 was 14.9
percent, compared to 11.7 percent in the fourth quarter of
2015.
Income from investments before taxes totaled $13.5 million in the fourth quarter of 2016,
compared to $4.2 million in the
fourth quarter of 2015. Earnings from limited partnerships
were $7.3 million in the fourth
quarter of 2016 compared to earnings of $0.1
million in the fourth quarter of 2015.
Webcast Information
Indemnity has scheduled a
conference call and live audio broadcast on the Web for 10:00
AM ET on February 24, 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.
About Erie Insurance
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.
"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 and investments in new technology and
systems;
- 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 and
difficulties with technology or data security breaches, including
cyber attacks;
- 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,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
(Unaudited)
|
|
|
|
|
Operating
revenue
|
|
|
|
|
|
|
|
|
Management fee
revenue, net
|
|
$
|
372,169
|
|
|
$
|
348,885
|
|
|
$
|
1,567,431
|
|
|
$
|
1,475,511
|
|
Service agreement
revenue
|
|
7,444
|
|
|
7,495
|
|
|
29,200
|
|
|
29,997
|
|
Total operating
revenue
|
|
379,613
|
|
|
356,380
|
|
|
1,596,631
|
|
|
1,505,508
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Commissions
|
|
216,837
|
|
|
206,691
|
|
|
893,800
|
|
|
847,880
|
|
Salaries and employee
benefits
|
|
51,777
|
|
|
55,998
|
|
|
213,356
|
|
|
226,713
|
|
All other operating
expenses
|
|
54,314
|
|
|
51,852
|
|
|
197,111
|
|
|
198,374
|
|
Total operating
expenses
|
|
322,928
|
|
|
314,541
|
|
|
1,304,267
|
|
|
1,272,967
|
|
Net revenue from
operations
|
|
56,685
|
|
|
41,839
|
|
|
292,364
|
|
|
232,541
|
|
|
|
|
|
|
|
|
|
|
Investment
income
|
|
|
|
|
|
|
|
|
Net investment
income
|
|
5,663
|
|
|
4,469
|
|
|
20,547
|
|
|
17,791
|
|
Net realized gains on
investments
|
|
643
|
|
|
617
|
|
|
672
|
|
|
492
|
|
Net impairment losses
recognized in earnings
|
|
(71)
|
|
|
(923)
|
|
|
(416)
|
|
|
(1,558)
|
|
Equity in earnings of
limited partnerships
|
|
7,304
|
|
|
81
|
|
|
7,025
|
|
|
16,983
|
|
Total investment
income
|
|
13,539
|
|
|
4,244
|
|
|
27,828
|
|
|
33,708
|
|
Interest expense,
net
|
|
101
|
|
|
—
|
|
|
101
|
|
|
—
|
|
Income before income
taxes
|
|
70,123
|
|
|
46,083
|
|
|
320,091
|
|
|
266,249
|
|
Income tax
expense
|
|
24,337
|
|
|
15,950
|
|
|
109,725
|
|
|
91,571
|
|
Net
income
|
|
$
|
45,786
|
|
|
$
|
30,133
|
|
|
$
|
210,366
|
|
|
$
|
174,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per
Share
|
|
|
|
|
|
|
|
|
Net income per
share
|
|
|
|
|
|
|
|
|
Class A common
stock – basic
|
|
$
|
0.98
|
|
|
$
|
0.65
|
|
|
$
|
4.52
|
|
|
$
|
3.75
|
|
Class A
common stock – diluted
|
|
$
|
0.87
|
|
|
$
|
0.57
|
|
|
$
|
4.01
|
|
|
$
|
3.33
|
|
Class B common
stock – basic
|
|
$
|
147
|
|
|
$
|
97
|
|
|
$
|
678
|
|
|
$
|
563
|
|
Class B common
stock – diluted
|
|
$
|
147
|
|
|
$
|
97
|
|
|
$
|
677
|
|
|
$
|
562
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – Basic
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
46,188,895
|
|
|
46,179,559
|
|
|
46,188,952
|
|
|
46,186,671
|
|
Class B common
stock
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – Diluted
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
52,413,119
|
|
|
52,506,600
|
|
|
52,435,303
|
|
|
52,498,811
|
|
Class B common
stock
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
|
|
|
|
|
|
|
|
Dividends declared
per share
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
$
|
0.7825
|
|
|
$
|
0.7300
|
|
|
$
|
2.9725
|
|
|
$
|
2.7730
|
|
Class B common
stock
|
|
$
|
117.375
|
|
|
$
|
109.500
|
|
|
$
|
445.875
|
|
|
$
|
415.950
|
|
Erie Indemnity Company
Reconciliation of Net Income
to Operating Income
Reconciliation of net income to operating 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 net income and operating
income:
|
|
Three months
ended
December 31,
|
|
Twelve months
ended
December 31,
|
(in thousands, except per share data)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
(Unaudited)
|
|
|
Net
income
|
|
$
|
45,786
|
|
|
$
|
30,133
|
|
|
$
|
210,366
|
|
|
$
|
174,678
|
|
Net realized (gains)
losses and impairments on investments
|
|
(572)
|
|
|
306
|
|
|
(256)
|
|
|
1,066
|
|
Income tax expense
(benefit)
|
|
199
|
|
|
(107)
|
|
|
89
|
|
|
(373)
|
|
Realized (gains)
losses and impairments, net of income taxes
|
|
(373)
|
|
|
199
|
|
|
(167)
|
|
|
693
|
|
Operating
income
|
|
$
|
45,413
|
|
|
$
|
30,332
|
|
|
$
|
210,199
|
|
|
$
|
175,371
|
|
|
|
|
|
|
|
|
|
|
Per Class A
common share-diluted:
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
0.87
|
|
|
$
|
0.57
|
|
|
$
|
4.01
|
|
|
$
|
3.33
|
|
Net realized (gains)
losses and impairments on investments
|
|
0.00
|
|
|
0.01
|
|
|
0.00
|
|
|
0.02
|
|
Income tax expense
(benefit)
|
|
0.00
|
|
|
0.00
|
|
|
0.00
|
|
|
(0.01)
|
|
Realized (gains)
losses and impairments, net of income taxes
|
|
0.00
|
|
|
0.01
|
|
|
0.00
|
|
|
0.01
|
|
Operating
income
|
|
$
|
0.87
|
|
|
$
|
0.58
|
|
|
$
|
4.01
|
|
|
$
|
3.34
|
|
Erie Indemnity
Company
|
Statements of
Financial Position
|
(in
thousands)
|
|
|
|
December 31,
2016
|
|
December 31,
2015
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
189,072
|
|
|
$
|
182,889
|
|
Available-for-sale
securities
|
|
56,138
|
|
|
62,067
|
|
Receivables from Erie
Insurance Exchange and affiliates
|
|
378,540
|
|
|
348,055
|
|
Prepaid expenses and
other current assets
|
|
30,169
|
|
|
24,697
|
|
Federal income taxes
recoverable
|
|
5,260
|
|
|
11,947
|
|
Accrued investment
income
|
|
6,337
|
|
|
5,491
|
|
Total current
assets
|
|
665,516
|
|
|
635,146
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
657,153
|
|
|
537,874
|
|
Limited partnership
investments
|
|
58,159
|
|
|
88,535
|
|
Fixed assets,
net
|
|
69,142
|
|
|
59,087
|
|
Deferred income
taxes, net
|
|
53,889
|
|
|
40,686
|
|
Note receivable from
Erie Family Life Insurance Company
|
|
25,000
|
|
|
25,000
|
|
Other
assets
|
|
20,096
|
|
|
20,968
|
|
Total
assets
|
|
$
|
1,548,955
|
|
|
$
|
1,407,296
|
|
|
|
|
|
|
Liabilities and
shareholders' equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Commissions
payable
|
|
$
|
210,559
|
|
|
$
|
195,542
|
|
Agent
bonuses
|
|
114,772
|
|
|
106,752
|
|
Accounts payable and
accrued liabilities
|
|
88,153
|
|
|
88,532
|
|
Dividends
payable
|
|
36,441
|
|
|
33,996
|
|
Deferred executive
compensation
|
|
19,675
|
|
|
20,877
|
|
Total current
liabilities
|
|
469,600
|
|
|
445,699
|
|
|
|
|
|
|
Defined benefit
pension plan
|
|
221,827
|
|
|
172,700
|
|
Employee benefit
obligations
|
|
756
|
|
|
1,234
|
|
Deferred executive
compensation
|
|
13,233
|
|
|
16,580
|
|
Long-term
borrowings
|
|
24,766
|
|
|
—
|
|
Other long-term
liabilities
|
|
1,863
|
|
|
1,580
|
|
Total
liabilities
|
|
732,045
|
|
|
637,793
|
|
|
|
|
|
|
Shareholders'
equity
|
|
816,910
|
|
|
769,503
|
|
Total liabilities
and shareholders' equity
|
|
$
|
1,548,955
|
|
|
$
|
1,407,296
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/erie-indemnity-reports-full-year-and-fourth-quarter-2016-results-300411714.html
SOURCE Erie Indemnity Company