Attached files
| file | filename |
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| EX-99.2 - EXHIBIT - ERIE INDEMNITY CO | ex-99212312013.htm |
| 8-K - 8-K - ERIE INDEMNITY CO | erie8-k12312013.htm |
Exhibit 99.1
CONTACT: Scott Beilharz, Investor Relations
814/870-7312 or 1-800-458-0811 ext. 7312
scott.beilharz@erieinsurance.com
Erie Indemnity Reports Fourth Quarter and Total Year 2013 Results
4Q 2013 Highlights - Indemnity Shareholder Interest | ||||
• | 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. |
Total Year 2013 Highlights - Indemnity Shareholder Interest | ||||
• | 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. |
Erie, Pa. – February 27, 2014 – 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.
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4Q 2013 Results of the Erie Insurance Group’s Operations(1) | ||||||||||||||||||||||||
Indemnity shareholder interest | Noncontrolling interest (Exchange) | Elimination of related party transactions | Erie Insurance Group | |||||||||||||||||||||
(dollars in millions) | 4Q'13 | 4Q'12 | 4Q'13 | 4Q'12 | 4Q'13 | 4Q'12 | 4Q'13 | 4Q'12 | ||||||||||||||||
Management operations | $ | 41 | $ | 34 | $ | — | $ | — | $ | (33 | ) | $ | (26 | ) | $ | 8 | $ | 8 | ||||||
Property and casualty insurance operations(2) | — | — | 22 | (61 | ) | 37 | 30 | 59 | (31 | ) | ||||||||||||||
Life insurance operations(2) | — | — | 14 | 12 | 0 | (1 | ) | 14 | 11 | |||||||||||||||
Investment operations | 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) | 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”). |
(2) | All property and casualty and life insurance results accrue to the interest of the subscribers (policyholders) of the Exchange, or noncontrolling interest. |
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.
Management Operations | ||||||
Indemnity shareholder interest | ||||||
(dollars in millions) | 4Q'13 | 4Q'12 | ||||
Management fee revenue, net | $ | 301 | $ | 275 | ||
Service agreement revenue | 8 | 8 | ||||
Total revenue from management operations | $ | 309 | $ | 283 | ||
Commissions | $ | 172 | $ | 158 | ||
Non-commission expense | 96 | 91 | ||||
Total cost of management operations | $ | 268 | $ | 249 | ||
Income from management operations before taxes | $ | 41 | $ | 34 | ||
Gross margin | 13.2 | % | 12.2 | % | ||
• | 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 | ||||||
Indemnity shareholder interest | ||||||
(dollars in millions) | 4Q'13 | 4Q'12 | ||||
Net investment income | $ | 4 | $ | 4 | ||
Net realized gains on investments | 0 | 1 | ||||
Net impairment losses recognized in earnings | 0 | 0 | ||||
Equity in earnings of limited partnerships | 9 | 5 | ||||
Income from investment operations before taxes | $ | 13 | $ | 10 | ||
• | 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. |
Total Year 2013 Results of the Erie Insurance Group’s Operations(1) | ||||||||||||||||||||||||
Indemnity shareholder interest | Noncontrolling interest (Exchange) | Elimination of related party transactions | Erie Insurance Group | |||||||||||||||||||||
(dollars in millions) | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||
Management operations | $ | 209 | $ | 205 | $ | — | $ | — | $ | (178 | ) | $ | (174 | ) | $ | 31 | $ | 31 | ||||||
Property and casualty insurance operations(2) | — | — | 68 | (246 | ) | 192 | 187 | 260 | (59 | ) | ||||||||||||||
Life insurance operations(2) | — | — | 48 | 46 | (2 | ) | (2 | ) | 46 | 44 | ||||||||||||||
Investment operations | 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) | 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”). |
(2) | All property and casualty and life insurance results accrue to the interest of the subscribers (policyholders) of the Exchange, or noncontrolling interest. |
Share Repurchase Program |
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).
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News releases and more information about Erie Insurance Group are available at www.erieinsurance.com.
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"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.
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