Print page
Email page
Download PDF
« Previous Release | Next Release »
Erie, Pa., August 5, 2009 - Erie Indemnity Company (NASDAQ: ERIE) announced today second-quarter 2009 earnings of $32.7 million, or $0.57 per diluted share, down 20.8% from the second quarter of 2008. Operating income (excluding net realized gains or losses on investments and related taxes) decreased to $32.1 million or $0.56 per share in the second quarter of 2009 from $50.6 million or $0.87 per share for the same period one year ago. The decline in operating income is attributable to losses before income tax from limited partnership investments of $26.8 million in the second quarter of 2009 compared to income before income tax from limited partnerships of $11.3 million recorded in the second quarter of 2008.
Management operations
Pre-tax income from management operations increased to $60.3 million in the second quarter of 2009 from $50.4 million in the second quarter of 2008.
Gross margins from management operations increased to 22.5 percent in the second quarter of 2009 compared to 19.1 percent in the second quarter of 2008. Management fee revenue increased 1.5 percent for the quarter ended June 30, 2009. Direct written premiums of the Property and Casualty Group, upon which the management fee is calculated, increased 1.4 percent in the second quarter of 2009, compared to the second quarter of 2008, reflecting an increase in policies in force offset by reductions in average premium.
Policies in force grew 3.4 percent to nearly 4.1 million at June 30, 2009. Growth in policies in force is the result of continuing improvements in policyholder retention and increases in new policies sold. The policyholder retention ratio increased to 90.8 percent at June 30, 2009, compared to 90.6 percent at December 31, 2008, and 90.4 percent at June 30, 2008. The year-over-year average premium per policy decreased 2.5 percent to $936 at June 30, 2009 compared to $960 at June 30, 2008.
The cost of management operations decreased 2.4 percent to $208.1 million in the second quarter of 2009 from $213.1 million for the same period in 2008. Commission costs, the largest component of the cost of management operations, decreased to $143.4 million, or 3.6 percent, in the second quarter 2009 from $148.8 million in the second quarter of 2008. Second quarter cost of management operations, excluding commission costs, increased 0.6 percent to $64.7 million from $64.3 million.
Insurance underwriting operations
Insurance underwriting operations generated income before income tax of $1.7 million in the second quarter of 2009 compared to income of $3.2 million generated for the same period in 2008. GAAP combined ratios of the insurance underwriting operations increased to 96.6 percent in the second quarter of 2009 from 93.7 percent in the second quarter of 2008.
Investment operations
Investment operations generated losses before income tax of $14.3 million for the second quarter of 2009, compared to gains before income tax of $7.9 million for the second quarter of 2008.Six Month 2009 Summary
Erie Indemnity net income was $43.9 million or $0.76 per share-diluted for the first six months of 2009 compared to $71.3 million or $1.22 per share-diluted for the six months ending June 30, 2008.
According to A.M. Best Company, Erie Insurance Group, based in Erie, Pennsylvania, is the 16th 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 over 4.0 million policies in force and operates in 11 states and the District of Columbia.
Erie Insurance earned J.D. Power and Associates' award for "Highest in Customer Satisfaction with the Auto Insurance Shopping Experience." This recognition is based on the results of the 2009 Insurance Shopping Study, which evaluates the experience of customers purchasing a new auto insurance policy. Erie Insurance has also been recognized on the list of Ward's 50 Group of top performing insurance companies The Ward's 50 award analyzes the financial performance of 3,000 property and casualty companies and 800 life-health insurance companies and recognizes the top performers for achieving outstanding financial results in safety and consistency over a five-year period (2004-2008).
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements contained herein are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are not in the present or past tense and can generally be identified by the use of words such as "anticipate," "believe," "estimate," "expect," "intend," "likely," "plan," "project," "seek," "should," "target," "will," and other expressions that indicate future trends and events. Forward-looking statements 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 such statements are discussions relating to management fee revenue, cost of management operations, underwriting, premium and investment income volumes, and agency appointments. Such 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 that could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements are the following: factors affecting the property/casualty and life insurance industries generally, including price competition, legislative and regulatory developments, government regulation of the insurance industry including approval of rate increases, the size, frequency and severity of claims, natural disasters, exposure to environmental claims, fluctuations in interest rates, inflation and general business conditions; the geographic concentration of our business as a result of being a regional company; the accuracy of our pricing and loss reserving methodologies; changes in driving habits; our ability to maintain our business operations including our information technology system; our dependence on the independent agency system; the quality and liquidity of our investment portfolio; our dependence on our relationship with Erie Insurance Exchange; and the other risks and uncertainties discussed or indicated in all documents filed by the Company with the Securities and Exchange Commission. A forward-looking statement speaks only as of the date on which it is made and reflects the Company's analysis only as of that date. The Company 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.
News releases and more information about Erie Insurance Group are available at http://www.erieinsurance.com.
CONTACT:
Karen Kraus Phillips, Investor Relations
1-800-458-0811 ext. 4665 or 814/870-4665
karen.krausphillips@erieinsurance.com
