ERIE INDEMNITY CO - FORM 8-K - EX-99.2

Attached files

file	filename
8-K - LIVE FILING - ERIE INDEMNITY CO	htm_45726.htm
EX-99.1 - EX-99.1 - ERIE INDEMNITY CO	exhibit1.htm

Exhibit 99.2

ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(dollars in millions, except per share data)


	Three			Three			Six		Six
	months			months			months		months
	ended			ended			ended		ended
	June 30,			June 30,			June 30,		June 30,
Revenues	2012			2011			2012		2011
Premiums earned	$	1,109		$	1,047		$	2,196	$	2,077
Net investment income		113			113			221		218
Net realized investment (losses) gains		(107	)		39			189		188
Net impairment losses recognized in earnings		0			0			0		0
Equity in earnings of limited partnerships		37			38			58		110
Other income		8			8			16		17

Total revenues		1,160			1,245			2,680		2,610

Benefits and expenses
Insurance losses and loss expenses		943			1,170			1,659		1,876
Policy acquisition and underwriting expenses		287			249			557		496

Total benefits and expenses		1,230			1,419			2,216		2,372

(Loss) income from operations before income taxes
and noncontrolling interest		(70	)		(174	)		464		238
Provision for income taxes		(32	)		(67	)		148		71

Net (loss) income		(38	)		(107	)		316		167
Less: Net (loss) income attributable to noncontrolling
interest in consolidated entity – Exchange		(81	)		(159	)		237		71

Net income attributable to Indemnity	$	43		$	52		$	79	$	96

Earnings Per Share
Net income attributable to Indemnity per share
Class A common stock – basic	$	0.90		$	1.05		$	1.65	$	1.93

Class A common stock – diluted	$	0.80		$	0.94		$	1.47	$	1.72

Class B common stock – basic and diluted	$	134.78		$	158.33		$	248.55	$	291.07

Weighted average shares outstanding attributable to
Indemnity – Basic
Class A common stock		47,492,305			49,250,061			47,619,852		49,518,069

Class B common stock		2,544			2,546			2,545		2,546

Weighted average shares outstanding attributable to
Indemnity – Diluted
Class A common stock		53,677,848			55,436,976			53,807,795		55,704,984

Class B common stock		2,544			2,546			2,545		2,546

Dividends declared per share
Class A common stock	$	0.5525		$	0.515		$	1.105	$	1.03

Class B common stock	$	87.8750		$	77.250		$	165.750	$	154.50

ERIE INDEMNITY COMPANY

RESULTS OF THE ERIE INSURANCE GROUP’S OPERATIONS BY INTEREST (Unaudited)

(in millions)


																		Eliminations of
	Indemnity			shareholder					Noncontrolling interest									related party
	interest								(Exchange)									transactions						Erie Insurance Group
				Three months ended								Three months ended						Three months ended						Three months ended
				June 30,								June 30,						June 30,						June 30,
	Percent			2012			2011		Percent			2012			2011			2012			2011			2012			2011
Management operations:

Management fee revenue, net		100.0	%	$	308		$	285				$	—		$	—		$	(308	)	$	(285	)	$	—		$	—
Service agreement revenue		100.0	%		8			9					—			—			—			—			8			9

Total revenue from management operations					316			294					—			—			(308	)		(285	)		8			9
Cost of management operations		100.0	%		257			230					—			—			(257	)		(230	)		—			—

*Income from management operations before taxes*					59			64					—			—			(51	)		(55	)		8			9

Property and casualty insurance operations:

Net premiums earned					—			—		100.0	%		1,092			1,030			—			—			1,092			1,030
Losses and loss expenses					—			—		100.0	%		919			1,147			(1	)		(2	)		918			1,145
Policy acquisition and other underwriting expenses					—			—		100.0	%		332			298			(53	)		(56	)		279			242

*Loss from property and casualty insurance operations before taxes*					—			—					(159	)		(415	)		54			58			(105	)		(357	)

Life insurance operations:⁽¹⁾

Total revenue					—			—		100.0	%		46			44			(1	)		(1	)		45			43
Total benefits and expenses					—			—		100.0	%		33			32			0			0			33			32

*Income from life insurance operations before taxes*					—			—					13			12			(1	)		(1	)		12			11

Investment operations:

Net investment income					4			4					87			88			(2	)		(2	)		89			90
Net realized (losses) gains on investments					(1	)		6					(110	)		30			—			—			(111	)		36
Net impairment losses recognized in earnings					0			0					0			0			—			—			0			0
Equity in earnings of limited partnerships					3			7					34			30			—			—			37			37

*Income from investment operations before taxes*					6			17					11			148			(2	)		(2	)		15			163

Income (loss) from operations before income taxes and noncontrolling interest					65			81					(135	)		(255	)		—			—			(70	)		(174	)
Provision for income taxes					22			29					(54	)		(96	)		—			—			(32	)		(67	)
Net income (loss)				$	43		$	52				$	(81	)	$	(159	)	$	-		$	-		$	(38	)	$	(107	)

(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 (Unaudited)
(in millions)


																	Eliminations of
								Noncontrolling interest									related party
	Indemnity shareholder interest							(Exchange)									transactions						Erie Insurance Group
																	Six months
				Six months ended							Six months ended						ended						Six months ended
				June 30,							June 30,						June 30,						June 30,
	Percent			2012		2011		Percent			2012			2011			2012			2011			2012		2011
Management operations:

Management fee revenue, net		100.0	%	$	577	$	536				$	—		$	—		$	(577	)	$	(536	)	$	—	$	—
Service agreement revenue		100.0	%		15		17					—			—			—			—			15		17

Total revenue from management operations					592		553					—			—			(577	)		(536	)		15		17
Cost of management operations		100.0	%		487		441					—			—			(487	)		(441	)		—		—

*Income from management operations before taxes*					105		114					—			—			(90	)		(95	)		15		17

Property and casualty insurance operations:

Net premiums earned					—		—		100.0	%		2,161			2,044			—			—			2,161		2,044
Losses and loss expenses					—		—		100.0	%		1,611			1,830			(2	)		(3	)		1,609		1,827
Policy acquisition and other underwriting expenses					—		—		100.0	%		634			580			(94	)		(98	)		540		482

(*Loss) income from property and casualty insurance operations before taxes*					—		—					(84	)		(366	)		96			101			12		(265	)

Life insurance operations:^{(1) (2)}

Total revenue		21.6% ⁽²⁾			—		10		78.4	%		89			78			(1	)		(1	)		88		87
Total benefits and expenses		21.6% ⁽²⁾			—		7		78.4	%		67			56			0			0			67		63

*Income from life insurance operations before taxes*					—		3					22			22			(1	)		(1	)		21		24

Investment operations:

Net investment income					8		8					170			169			(5	)		(5	)		173		172
Net realized gains on investments					2		7					183			174			—			—			185		181
Net impairment losses recognized in earnings					0		0					0			0			—			—			0		0
Equity in earnings of limited partnerships					4		18					54			91			—			—			58		109

*Income from investment operations before taxes*					14		33					407			434			(5	)		(5	)		416		462

Income from operations before income taxes and noncontrolling interest					119		148					345			90			—			—			464		238
Provision for income taxes					40		52					108			19			—			—			148		71
Net income				$	79	$	96				$	237		$	71		$	-		$	-		$	316	$	167

(1)

(2)

Prior to and through March 31, 2011, Indemnity retained a 21.6% ownership interest in EFL, which accrued to the Indemnity shareholder interest, and the Exchange retained a 78.4% ownership interest in EFL, which accrued to the interest of the subscribers (policyholders) of the Exchange, or noncontrolling interest. Due to the sale of Indemnity’s 21.6% ownership interest in EFL to the Exchange on March 31, 2011, 100% of EFL’s life insurance results accrue to the interest of the subscribers (policyholders) of the Exchange, or noncontrolling interest, after March 31, 2011.

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			Three			Six			Six
	months ended			months ended			months ended			months ended
	June 30,			June 30,			June 30,			June 30,
	2012			2011			2012			2011
(in millions, except per share data)
	(unaudited)						(unaudited)
Operating income attributable to Indemnity	$	44		$	48		$	78		$	91

Net realized (losses) gains and impairments on investments		(1	)		6			2			7
Income tax benefit (expense)		0			(2	)		(1	)		(2	)

Realized (losses) gains and impairments, net of income taxes		(1	)		4			1			5

Net income attributable to Indemnity	$	43		$	52		$	79		$	96

Per Indemnity Class A common share – diluted:
Operating income attributable to Indemnity	$	0.82		$	0.87		$	1.45		$	1.64

Net realized (losses) gains and impairments on investments		(0.03	)		0.10			0.03			0.12
Income tax benefit (expense)		0.01			(0.03	)		(0.01	)		(0.04	)

Realized (losses) gains and impairments, net of income taxes		(0.02	)		0.07			0.02			0.08

Net income attributable to Indemnity	$	0.80		$	0.94		$	1.47		$	1.72

ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in millions)


	June 30,		December 31,
	2012		2011
Assets	(Unaudited)
Investments-Indemnity
Available-for-sale securities, at fair value:
Fixed maturities	$	510	$	548
Equity securities		26		25
Trading securities, at fair value		28		27
Limited partnerships		199		208
Other invested assets		1		1
Investments-Exchange
Available-for-sale securities, at fair value:
Fixed maturities		7,569		7,292
Equity securities		605		564
Trading securities, at fair value		2,490		2,308
Limited partnerships		1,083		1,082
Other invested assets		19		19

Total investments		12,530		12,074
Cash and cash equivalents (Exchange portion of $227 and $174, respectively)		240		185
Premiums receivable from policyholders – Exchange		1,073		976
Reinsurance recoverable – Exchange		168		166
Deferred income taxes – Indemnity		21		19
Deferred acquisition costs – Exchange		500		487
Other assets (Exchange portion of $395 and $322, respectively)		510		441
Total assets	$	15,042	$	14,348

Liabilities and shareholders’ equity
Liabilities
Indemnity liabilities
Other liabilities	$	447	$	455
Exchange liabilities
Losses and loss expense reserves		3,613		3,499
Life policy and deposit contract reserves		1,706		1,671
Unearned premiums		2,331		2,178
Deferred income taxes		235		147
Other liabilities		113		105

Total liabilities		8,445		8,055

Indemnity’s shareholders’ equity		766		781
Noncontrolling interest in consolidated entity – Exchange		5,831		5,512

Total equity		6,597		6,293

Total liabilities, shareholders’ equity and noncontrolling interest	$	15,042	$	14,348

Attached files

Stock widget

Investing forum

ERIE INDEMNITY CO Reports