Erie Indemnity Company Q2 Earnings in Line, Revenues Beat

Zacks

Erie Indemnity Company (ERIE) reported second-quarter 2014 net income of 94 cents per share, in line with Zacks Consensus Estimate. Results improved year over year by 12%, driven by increased revenues from management operations and a low rise in expense.

The improved performance was also reflected in the share price that gained 1.19% to close at $74.09 in the last trading session.

Operational Update

Total revenue of Erie Indemnity was $1.6 billion, significantly outperforming the Zacks Consensus Estimate of $373 million. Results improved year over year by 12.1%, largely driven by a rise in the premiums earned (up 8.6% year over year) and net investment income (up 6.7% year over year).

The company’s total benefits and expenses increased 25% year over year to $1.4 billion, led by increase in insurance losses and loss expenses as well as policy acquisition and underwriting expenses.

Segments Details

Management operations of Erie Indemnity reported revenue of $374 million, up 8.7% year over year. Direct written premium of the property and casualty group (on which the management fee is calculated) improved 8%.

Premium per policy increased 4.2% year over year. Erie Indemnity’s solid policy holder retention and the increase in new policies resulted in policy growth of 4.5%.

Commissions rose 10% on higher direct written premium of the property and casualty insurance operations.

Non-commission expenses increased 2.8% to $3 million year over year.

Pre-tax income from Investment operations declined 12.5% to $7 million year over year due to low equity and earnings of limited partnerships in the reported quarter. Net investment income increased $1 million year over year.

Financial Update

Erie Indemnity Company exited the quarter with cash and cash equivalents of $300 million, down 34% from Dec 31, 2013.

Total assets increased 4.7% to $17.4 billion from 2013 end level as of Jun 30, 2014.

Shareholder’s equity rose 2.9% to $755 million from 2013 end level as of Jun 30, 2014.

Dividend and Share Repurchase Update

The board of directors of Erie Indemnity approved a quarterly cash dividend of 63.5 cents per Class A common stock, payable on Oct 17, 2014 to shareholders of record as of Oct 2, 2014. This dividend rate represents a 7.2 % increase from the quarterly dividend rate paid in 2013.

The company spent $8.2 million to repurchase 0.1 million shares in the quarter. Notably, from the beginning of the year through Jul 18, Erie Indemnity bought back 0.3 million shares for $19.2 million. It had shares worth $18 million remaining as on Jul 18.

Zacks Rank

Currently, Erie Indemnity Company has a Zacks Rank #3 (Hold).

Performance of Other Insurance Brokers

Validus Holdings, Ltd. (VR) reported second-quarter 2014 net operating income of $1.39 per share, which missed the Zacks Consensus Estimate by 4.1% but improved 35% year over year.

Brown & Brown Inc. (BRO) posted an operating net income of 38 cents per share for second-quarter 2014, falling short of the Zacks Consensus Estimate by 7.3%. However, the figure marked a year-over-year increase of 8.6% based on higher revenues.

Aon plc’s (AON) second-quarter 2014 operating earnings of $1.25 per share exceeded the Zacks Consensus Estimate of $1.20 and rose 13% year over year.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

To read this article on Zacks.com click here.

Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.

Be the first to comment

Leave a Reply