Erie Indemnity Reports Fourth Quarter 2009 Results
ERIE, Pa., Feb. 25 /PRNewswire-FirstCall/ --
4Q 2009 Highlights
- Net income per share-diluted was $0.43 per share in the fourth quarter 2009 compared to a net loss per share-diluted of $0.12 per share in the fourth quarter of 2008.
- Net operating income per share (excluding net realized gains or losses and impairments on investments and related taxes) increased to $0.39 per share in the fourth quarter of 2009 from $0.29 per share for the same period one year ago.
- Gross margins from management operations increased to 14.6 percent in the fourth quarter of 2009 from 12.1 percent in the fourth quarter of 2008.
- GAAP combined ratios of the insurance underwriting operations increased to 91.1 percent in the fourth quarter of 2009 from 89.0 percent in the fourth quarter of 2008.
- Revenue from investment operations totaled $1.2 million for the fourth quarter of 2009, compared to losses of $40.3 million for the fourth quarter of 2008.
Erie Indemnity Company (Nasdaq: ERIE) announced today fourth quarter 2009 earnings of $24.9 million, or $0.43 per diluted share, compared to losses of $6.3 million, or $0.12 per diluted share, from the fourth quarter of 2008. Operating income (excluding net realized gains or losses and impairments on investments and related taxes) increased to $22.6 million, or $0.39 per share, in the fourth quarter of 2009 from $15.0 million, or $0.29 per share, for the same period last year.
Details of Fourth Quarter 2009 Segment Results:
Segment Income
--------------
(in millions) 4Q'09 4Q'08
----- -----
Management Operations $33.9 $27.3
Insurance Underwriting Operations 4.7 5.7
Investment Operations 1.2 (40.3)
----- -----
Income before income taxes $39.8 $(7.3)
Provision for income taxes 14.9 (1.0)
----- -----
Net Income $24.9 $(6.3)
Management operations
Pre-tax income from management operations increased to $33.9 million in the fourth quarter of 2009 from $27.3 million in the fourth quarter of 2008.
Gross margins from management operations increased to 14.6 percent in the fourth quarter of 2009 compared to 12.1 percent in the fourth quarter of 2008. Management fee revenue increased 2.9 percent for the quarter ended December 31, 2009 compared to the same period in 2008. Direct written premiums of the Property and Casualty Group, upon which the management fee is calculated, increased 2.8 percent in the fourth quarter of 2009, compared to the fourth quarter of 2008, reflecting an increase in policies in force offset by lower average premium per policy.
Policies in force grew 3.5 percent to over 4.1 million at December 31, 2009 due to continuing strong policyholder retention rates and increased new policies sold. The policyholder retention ratio was 90.6 percent at December 31, 2009 and 2008. The year-over-year average premium per policy for all lines of business decreased 1.9 percent in December 31, 2009 compared to 2008. The personal lines year-over-year average premium per policy increased 0.1 percent, while the commercial lines year-over-year average premium per policy decreased 6.1 percent. The commercial lines decrease was driven by lower workers compensation premium due to shifts in the mix of our book of business and lower exposures driven by reductions in payroll levels.
The cost of management operations decreased slightly to $197.9 million in the fourth quarter of 2009 from $198.1 million for the same period in 2008. Commission costs, the largest component of the cost of management operations, increased to $133.1 million, or 0.8 percent, in the fourth quarter 2009 from $132.1 million in the fourth quarter of 2008. Fourth quarter cost of management operations, excluding commission costs, decreased 1.9 percent to $64.8 million from $66.0 million, primarily driven by the capitalization of certain labor costs related to our technology initiatives.
Insurance underwriting operations
Insurance underwriting operations generated income before income tax of $4.7 million in the fourth quarter of 2009 compared to $5.7 million for the same period in 2008. GAAP combined ratios of the insurance underwriting operations increased to 91.1 percent in the fourth quarter of 2009 from 89.0 percent in the fourth quarter of 2008.
- The current accident year loss and loss expense ratio, excluding catastrophe losses, was 68.1 percent in the fourth quarter of 2009, which was 0.6 points lower than the 68.7 percent in the fourth quarter of 2008.
- Development of prior accident year loss reserves improved the combined ratio by 6.2 points in the fourth quarter of 2009 compared to 6.8 points for the fourth quarter of 2008.
- Catastrophe losses contributed 1.9 points and 0.8 points to the GAAP combined ratio in the fourth quarters of 2009 and 2008, respectively.
Investment operations
Investment operations generated income before income tax of $1.2 million for the fourth quarter of 2009, compared to losses before income tax of $40.3 million for the fourth quarter of 2008.
- Net investment income, which includes primarily interest and dividends on the Company's bonds and stocks, decreased by 5.7 percent to $10.2 million for the quarter ended December 31, 2009, from $10.8 million for the same period in 2008. This decrease was driven by lower preferred stock holdings.
- Net realized gains on investments totaled $5.3 million compared to losses of $25.1 million in the fourth quarters of 2009 and 2008, respectively. The common stock portfolio generated realized losses of $1.1 million in the fourth quarter of 2009, compared to realized losses of $18.4 million in the fourth quarter of 2008.
- Impairment losses recognized in earnings totaled $1.7 million in the fourth quarter of 2009 compared to $7.7 million in the fourth quarter of 2008.
- Equity in losses of limited partnerships totaled $12.5 million in the fourth quarter of 2009 compared to $14.6 million in the fourth quarter of 2008.
- Equity in losses of Erie Family Life Insurance Company was $0.1 million in the fourth quarter of 2009, compared to $3.7 million in the fourth quarter of 2008.
Full Year 2009 Summary
Erie Indemnity net income totaled $108.5 million, or $1.89 per share-diluted, for the year ending December 31, 2009 compared to $69.2 million, or $1.19 per share-diluted, for the year ending 2008. Investment operations improved in 2009 as the financial markets showed signs of recovery compared to 2008. Operating income (excluding net realized gains or losses and impairments on investments and related taxes) decreased to $109.6 million, or $1.91 per share, in 2009 from $142.7 million, or $2.46 per share in 2008.
Segment Income
--------------
(in millions) 2009 2008
------ ------
Management Operations $186.5 $172.5
Insurance Underwriting Operations 1.6 13.3
Investment Operations (30.4) (77.8)
------ ------
Income before income taxes $157.7 $108.0
Provision for income taxes 49.2 38.8
------ ------
Net Income $108.5 $69.2
- Gross margins from management operations increased to 18.7 in 2009 from 17.6 in 2008.
- GAAP combined ratios of the insurance underwriting operations increased to 99.2 in 2009 from 93.6 in 2008.
- Losses from investment operations totaled $30.4 million in 2009 compared to $77.8 million in 2008.
We repurchased 49,220 shares of our outstanding Class A nonvoting common stock in conjunction with our stock repurchase plan at a total cost of $1.9 million in the fourth quarter of 2009. For the year, we repurchased 91,420 shares at a total cost of $3.1 million. In May 2009, our Board of Directors approved a continuation of the current stock repurchase program through June 30, 2010. We have approximately $98 million of repurchase authority remaining under this plan at December 31, 2009.
According to A.M. Best Company, Erie Insurance Group, based in Erie, Pennsylvania, is the 14th 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 4.1 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.
Erie Indemnity Company
Consolidated Statements of Operations
(dollars in thousands, except per share data)
Three months ended Twelve months ended
December 31, December 31,
2009 2008 2009 2008
---- ---- ---- ----
Operating revenue
Management fee
revenue, net $210,753 $204,790 $912,023 $897,526
Premiums earned 52,608 51,688 209,457 207,407
Service agreement
revenue 8,872 8,817 34,783 32,298
---------------- ------- ------- --------- ---------
Total operating
revenue 272,233 265,295 1,156,263 1,137,231
---------------- ------- ------- --------- ---------
Operating expenses
Cost of management
operations 187,019 187,258 768,668 765,012
Losses and loss
expenses incurred 33,618 32,399 145,452 137,167
Policy acquisition
and other underwriting
expenses 12,969 12,626 54,025 49,218
---------------- ------- ------- --------- ---------
Total operating
expenses 233,606 232,283 968,145 951,397
---------------- ------- ------- ------- -------
Investment income
(loss) - unaffiliated
Investment income,
net of expenses 10,202 10,823 41,728 44,181
Realized gains (losses)
on investments 5,311 (25,146) 10,396 (43,515)
Net impairment
losses recognized
in earnings (1,676) (7,670) (12,059) (69,504)
Equity in (losses)
earnings
of limited
partnerships (12,527) (14,600) (76,108) 5,710
---------------- ------- ------- ------- -----
Total investment
income (loss) -
unaffiliated 1,310 (36,593) (36,043) (63,128)
------------------- ----- ------- ------- -------
Income before income
taxes and equity
in earnings
(losses) of Erie
Family Life Insurance 39,937 (3,581) 152,075 122,706
Provision for
income taxes 14,870 (685) 48,787 39,865
Equity in (losses)
earnings of Erie
Family Life Insurance,
net of tax (126) (3,406) 5,202 (13,603)
---- ------ ----- -------
Net income (loss) $24,941 $(6,302) $108,490 $69,238
======= ======= ======== =======
Net income (loss)
per share:
Class A common
stock - basic $0.48 $(0.12) $2.10 $1.34
===== ====== ===== =====
Class A common
stock - diluted 0.43 (0.12) 1.89 1.19
==== ===== ==== ====
Class B common
stock - basic
and diluted 72.49 (12.39) 312.45 204.20
===== ====== ====== ======
Weighted average
shares outstanding:
Class A common
stock - basic 51,244,073 51,349,457 51,250,606 51,824,649
========== ========== ========== ==========
Class A common
stock - diluted 57,371,495 51,369,552 57,385,228 57,967,144
========== ========== ========== ==========
Class B common
stock - basic
and diluted 2,546 2,551 2,549 2,551
===== ===== ===== =====
Dividends declared
per share:
Class A common
stock $0.48 $0.45 $1.83 $1.77
===== ===== ===== =====
Class B common
stock 72.00 67.50 274.50 265.50
===== ===== ====== ======
Erie Indemnity Company
Consolidated Statements of Operations - Segment Basis
(amounts in thousands, except per share data)
Three months ended Twelve months ended
December 31, December 31,
2009 2008 2009 2008
---- ---- ---- ----
Management operations
Management fee revenue $222,944 $216,644 $965,110 $949,775
Service agreement revenue 8,872 8,817 34,783 32,298
------------------ ------- ------- ------- -------
Total revenue from management
operations 231,816 225,461 999,893 982,073
Cost of management operations 197,870 198,121 813,411 809,548
------------------ ------- ------- ------- -------
Income from management
operations 33,946 27,340 186,482 172,525
--------------- ------ ------ ------- -------
Insurance underwriting operations
Premiums earned 52,608 51,688 209,457 207,407
--------------- ------ ------ ------- -------
Losses and loss expenses incurred 33,618 32,399 145,452 137,167
Policy acquisition and other
underwriting expenses 14,310 13,618 62,369 56,931
---------------------- ------ ------ ------ ------
Total losses and expenses 47,928 46,017 207,821 194,098
------------------- ------ ------ ------- -------
Underwriting income 4,680 5,671 1,636 13,309
--------------- ----- ----- ----- ------
Investment operations
Investment income, net
of expenses 10,202 10,823 41,728 44,181
Realized gains (losses) on
investments 5,311 (25,146) 10,396 (43,515)
Net impairment losses recognized
in earnings (1,676) (7,670) (12,059) (69,504)
Equity in (losses) earnings of
limited partnerships (12,527) (14,600) (76,108) 5,710
Equity in (losses) earnings of
Erie Family Life Insurance (135) (3,662) 5,593 (14,627)
------------------ ---- ------ ----- -------
Net revenue (loss) from
investment operations 1,175 (40,255) (30,450) (77,755)
--------------------- ----- ------- ------- -------
Income (loss) before income taxes 39,801 (7,244) 157,668 108,079
Provision for income taxes 14,860 (942) 49,178 38,841
------------------- ------- ------- -------- -------
Net income (loss) $24,941 $(6,302) $108,490 $69,238
==================== ======= ======= ======== =======
Net income (loss) per share -
Class A basic $0.48 $(0.12) $2.10 $1.34
================= ===== ====== ===== =====
Net income (loss) per share -
Class A diluted* 0.43 (0.12) 1.89 1.19
==================== ==== ===== ==== ====
Net income (loss) per share -
Class B basic and diluted 72.49 (12.39) 312.45 204.20
===================== ===== ====== ====== ======
Weighted average shares
outstanding - Class A diluted* 57,371 51,370 57,385 57,967
============================ ====== ====== ====== ======
Amounts presented on a segment basis are gross of
intercompany/intersegment items.
*Given the net loss generated in the fourth quarter of 2008, the effect
of using the if-converted method would be anti-dilutive; therefore the
two class method was used to calculate earnings per share for the
Class A common stock-diluted for the three months ended December 31,
2008.
Erie Indemnity Company
Reconciliation of Operating Income to Net Income
Definition of non-GAAP and operating measures
---------------------------------------------
We believe that investors' understanding of our performance is enhanced
by the disclosure of the following non-GAAP financial measure. Our
method of calculating this measure may differ from those used by other
companies and therefore comparability may be limited.
Operating income is net income excluding realized capital gains and
losses and impairment losses and related federal income taxes.
We elected the fair value measurement option for our common stock
portfolio effective January 1, 2008. As such, changes in value related
to common stocks are reported in earnings. These unrealized gains or
losses are included in the net realized gains/losses on investments on
the Consolidated Statements of Operations that is used to calculate
operating income. Equity in earnings or losses of Erie Family Life
Insurance Company and equity in earnings or losses of limited
partnerships are not excluded from the calculation of operating income.
Equity in earnings or losses of limited partnerships includes the
respective investment's realized capital gains and losses, as well as
unrealized gains and losses.
Net income is the GAAP measure that is most directly comparable to
operating income.
We use operating income to evaluate the results of operations. It
reveals trends in our management services, insurance underwriting and
investment operations 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,
the timing of which is unrelated to our management services and
insurance underwriting processes. We believe it is useful for investors
to evaluate these components separately and in the aggregate when
reviewing our performance. 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 and does not
reflect our overall profitability.
The following table reconciles operating income and net income for the
periods ended December 31, 2009 and 2008:
(in thousands, except per share Three months ended Twelve months ended
data) December 31, December 31,
2009 2008 2009 2008
---- ---- ---- ----
(unaudited) (unaudited)
Operating income $22,578 $15,028 $109,571 $142,700
Net realized gains (losses) and
impairments on investments 3,635 (32,816) (1,663) (113,019)
Income tax (expense) benefit (1,272) 11,486 582 39,557
------ ------ --- ------
Realized gains (losses) and
impairments, net of income
taxes 2,363 (21,330) (1,081) (73,462)
----- ------- ------ -------
Net income (loss) $24,941 $(6,302) $108,490 $69,238
======= ======= ======== =======
Three months ended Twelve months ended
December 31, December 31,
Per Class A share - diluted: 2009 2008 2009 2008
---- ---- ---- ----
(unaudited) (unaudited)
Operating income $0.39 $0.29 $1.91 $2.46
Net realized gains (losses) and
impairments on investments 0.06 (0.63) (0.03) (1.95)
Income tax (expense) benefit (0.02) 0.22 0.01 0.68
----- ---- ---- ----
Realized gains (losses) and
impairments, net of income
taxes 0.04 (0.41) (0.02) (1.27)
---- ----- ----- -----
Net income (loss) $0.43 $(0.12) $1.89 $1.19
===== ====== ===== =====
Erie Indemnity Company
Consolidated Statements of Financial Position
(amounts in thousands, except per share data)
December 31, December 31,
2009 2008
---- ----
Assets
Investments
Available-for-sale securities, at fair value:
Fixed maturities $664,026 $563,429
Equity securities 37,725 55,281
Trading securities, at fair value 42,153 33,338
Other invested assets 236,096 300,391
------- -------
Total investments 980,000 952,439
Cash and cash equivalents 76,505 61,073
Equity in Erie Family Life Insurance 71,934 29,236
Premiums receivable from policyholders 237,229 244,760
Receivables from affiliates 1,139,712 1,130,610
Other assets 161,137 195,268
------- -------
Total assets $2,666,517 $2,613,386
========== ==========
Liabilities and shareholders' equity
Liabilities
Unpaid losses and loss expenses $965,420 $965,081
Unearned premiums 433,659 424,370
Other liabilities 365,461 432,060
------- -------
Total liabilities 1,764,540 1,821,511
Total shareholders' equity 901,977 791,875
------- -------
Total liabilities and shareholders' equity $2,666,517 $2,613,386
========== ==========
Book value per share $15.74 $13.79
====== ======
Shares outstanding 57,314 57,405
====== ======
Erie Indemnity Company
Reconciliation of Property and Casualty Group to
Indemnity Results
(dollars in thousands) Three months ended Twelve months ended
December 31, December 31,
2009 2008 2009 2008
------------------------- ---- ---- ---- ----
Property and Casualty Group
insurance underwriting
operations (SAP basis)
----------------------------
Direct underwriting results
Direct written premium $886,574 $862,177 $3,860,839 $3,799,901
-------- -------- ---------- ----------
Premiums earned 946,004 929,576 3,816,292 3,786,632
------- ------- --------- ---------
Loss and loss expenses
incurred 633,123 608,514 2,660,885 2,509,350
Policy acquisition and
other underwriting
expenses 251,038 240,477 1,085,447 1,050,734
------- ------- --------- ---------
Total losses and
expenses 884,161 848,991 3,746,332 3,560,084
------- ------- --------- ---------
Direct underwriting
income 61,843 80,585 69,960 226,548
------ ------ ------ -------
Nonaffiliated reinsurance
underwriting results
Assumed voluntary-less
ceded retrocessions 3,011 16,014 6,187 16,500
Assumed involuntary (2,515) 12,218 (42,018) 25,310
Less: Ceded (19,604) 13,495 7,576 28,478
------- ------ ----- ------
Nonaffiliated reinsurance
underwriting income 20,100 14,737 (43,407) 13,332
------- ------- ------- --------
Net underwriting income
(SAP basis) $81,943 $95,322 $26,553 $239,880
======= ======= ======= ========
-----------------------
Erie Indemnity insurance
underwriting operations
(SAP to GAAP basis)
------------------------
Percent of pool assumed by
the Indemnity Company 5.50% 5.50% 5.50% 5.50%
---- ---- ---- ----
Indemnity preliminary
underwriting income
(SAP basis) $4,507 $5,243 $1,460 $13,193
SAP to GAAP adjustments 173 428 176 116
--- --- --- ---
Indemnity underwriting income
before tax (GAAP basis) $4,680 $5,671 $1,636 $13,309
====== ====== ====== =======
Property & Casualty Group (SAP basis)
Net basis
---------
Loss and loss expense ratio 64.7% 63.9% 69.3% 66.0%
Underwriting ratio 27.9 27.3 27.6 27.2
Policyholder dividends ratio 0.0 0.1 0.0 0.1
--- --- --- ---
Statutory combined ratio 92.6 91.3 96.9 93.3
---- ---- ---- ----
Adjusted combined ratio,
excluding profit component 89.8 89.1 92.9 89.6
Direct business
---------------
Loss ratio points from
prior accident year reserve
development - (redundancy)
deficiency (1.7) (3.4) (0.6) (3.2)
Loss ratio points from
prior accident years from
salvage and subrogation
recoveries collected (1.8) (1.2) (1.9) (1.8)
---- ---- ---- ----
Total loss ratio points
from prior accident years (3.5) (4.6) (2.5) (5.0)
---- ---- ---- ----
Loss ratio points from
catastrophes 2.0 0.8 3.4 3.4
Erie Indemnity Company
GAAP combined ratio 91.1 89.0 99.2 93.6
GAAP loss ratio points
from catastrophes 1.9 0.8 3.4 3.4
--- --- --- ---
SAP basis represents statutory accounting principles as codified by the
National Association of Insurance Commissioners (NAIC).
Selected financial data of Erie Insurance Exchange:
---------------------------------------------------
The selected financial data below is derived from the Erie Insurance
Exchange's financial statements prepared in accordance with Statutory
Accounting Principles. In our opinion, all adjustments consisting only
of normal recurring accruals, considered necessary for a fair
presentation have been included. The financial data set forth below is
only a summary.
(in thousands) Three months ended Twelve months ended
Statutory accounting basis December 31, December 31,
2009 2008 2009 2008
---- ---- ---- ----
Premiums earned $889,379 $871,648 $3,608,144 $3,566,450
Losses, loss expenses
and underwriting expenses 811,738 781,572 3,582,848 3,339,743
------- ------- --------- ---------
Net underwriting income 77,641 90,076 25,296 226,707
Total investment income
(loss) 79,764 (346,207) (84,056) (640,348)
------ -------- ------- --------
Income (loss) before
income taxes 157,405 (256,131) (58,760) (413,641)
Federal income tax
expense (benefit) 31,501 (179,412) (2,595) (50,248)
------ -------- ------ -------
Net income (loss) $125,904 $(76,719) $(56,165) $(363,393)
======== ======== ======== =========
(in thousands) At At
Statutory accounting December 31, December 31,
basis 2009 2008
---- ----
Cash and invested
assets $8,361,254 $7,595,727
Other assets 1,186,712 1,552,902
--------- ---------
Total assets $9,547,966 $9,148,629
========== ==========
Loss, loss expense and
unearned premium
reserves $4,699,222 $4,768,240
Other liabilities 331,168 334,399
------- -------
Total liabilities 5,030,390 5,102,639
--------- ---------
Policyholders' surplus 4,517,576 4,045,990
--------- ---------
Total liabilities and
policyholders'
surplus $9,547,966 $9,148,629
========== ==========
Management fee revenue by major lines of business - Segment basis:
------------------------------------------------------------------
Three months ended Twelve months ended
(dollars in December 31, % December 31, %
thousands) 2009 2008 Change 2009 2008 Change
---- ---- ------ ---- ---- ------
Private passenger
auto $107,992 $104,471 3.4% $466,376 $456,536 2.2%
Homeowners 47,230 44,025 7.3 198,172 185,831 6.6
Commercial
multi-peril 24,965 24,371 2.4 110,138 108,942 1.1
Commercial auto 16,607 17,066 (2.7) 75,252 77,772 (3.2)
Workers
compensation 12,281 13,650 (10.0) 62,029 70,186 (11.6)
All other lines
of business 12,569 11,961 5.1 53,243 50,708 5.0
------ ------ --- ------ ------ ---
221,644 215,544 2.8 965,210 949,975 1.6
Change in
allowance for
management fee
returned on
cancelled policies 1,300 1,100 (100) (200)
----- ----- ---- ----
Management fee
revenue, net of
allowance $222,944 $216,644 2.9% $965,110 $949,775 1.6%
======== ======== === ======== ======== ===
Management fee
rate 25.00% 25.00% 25.00% 25.00%
===== ===== ===== =====
Growth rates of policies in force for Property and Casualty Group
insurance operations by major lines of business:
-----------------------------------------------------------------
Private 12-mth. 12-mth.
Passenger growth growth
Date Auto rate Homeowners rate
---- ---- ---- ---------- ----
12/31/2007 1,651,234 1.1% 1,413,712 2.6%
03/31/2008 1,655,869 1.2 1,420,250 2.6
06/30/2008 1,667,446 1.4 1,433,504 2.5
09/30/2008 1,677,151 1.7 1,446,779 2.7
12/31/2008 1,683,526 2.0 1,454,797 2.9
03/31/2009 1,694,583 2.3 1,466,227 3.2
06/30/2009 1,709,580 2.5 1,483,763 3.5
09/30/2009 1,721,388 2.6 1,498,285 3.6
12/31/2009 1,730,213 2.8 1,507,674 3.6
12-mth. Total 12-mth.
All Other growth Personal growth
Date Personal Lines rate Lines rate
---- -------------- ---- ----- ----
12/31/2007 321,431 6.6% 3,386,377 2.2%
03/31/2008 325,926 6.7 3,402,045 2.3
06/30/2008 332,922 6.8 3,433,872 2.4
09/30/2008 340,566 7.5 3,464,496 2.7
12/31/2008 346,953 7.9 3,485,276 2.9
03/31/2009 353,470 8.5 3,514,280 3.3
06/30/2009 362,582 8.9 3,555,925 3.6
09/30/2009 369,253 8.4 3,588,926 3.6
12/31/2009 375,192 8.1 3,613,079 3.7
12-mth. 12-mth.
growth CML* growth
Date CML* Auto rate Multi-Peril rate
---- --------- ---- ----------- ----
12/31/2007 122,558 2.3% 228,214 4.4%
03/31/2008 122,882 2.5 229,577 4.7
06/30/2008 123,955 1.9 234,393 4.8
09/30/2008 124,418 1.9 236,994 4.7
12/31/2008 124,205 1.3 237,228 3.9
03/31/2009 123,747 0.7 236,804 3.1
06/30/2009 124,917 0.8 240,970 2.8
09/30/2009 125,149 0.6 243,771 2.9
12/31/2009 125,677 1.2 245,137 3.3
12-mth. 12-mth.
Workers growth All Other growth
Date Comp. rate CML* Lines rate
---- ----- ---- ---------- ----
12/31/2007 54,720 1.5% 96,464 4.1%
03/31/2008 54,927 2.7 96,511 3.9
06/30/2008 55,801 3.4 97,745 3.3
09/30/2008 56,381 3.8 98,786 2.7
12/31/2008 56,704 3.6 98,796 2.4
03/31/2009 56,661 3.2 98,622 2.2
06/30/2009 57,549 3.1 99,973 2.3
09/30/2009 58,238 3.3 101,157 2.4
12/31/2009 58,747 3.6 101,364 2.6
Total 12-mth.
CML* growth
Date Lines rate
---- ----- ----
12/31/2007 501,956 3.5%
03/31/2008 503,897 3.8
06/30/2008 511,894 3.7
09/30/2008 516,579 3.5
12/31/2008 516,933 3.0
03/31/2009 515,834 2.4
06/30/2009 523,409 2.2
09/30/2009 528,315 2.3
12/31/2009 530,925 2.7
12-mth.
Total growth
Date All Lines rate
---- --------- ----
12/31/2007 3,888,333 2.4%
03/31/2008 3,905,942 2.5
06/30/2008 3,945,766 2.5
09/30/2008 3,981,075 2.8
12/31/2008 4,002,209 2.9
03/31/2009 4,030,114 3.2
06/30/2009 4,079,334 3.4
09/30/2009 4,117,241 3.4
12/31/2009 4,144,004 3.5
CML* = Commercial
Policy retention trends for Property and Casualty Group insurance
operations by major lines of business:
-----------------------------------------------------------------
Private CML* All All
Passenger Home- CML* Multi- Workers Other Total
Date Auto owners Auto Peril Comp. Lines Lines
---- ---- ------ ----- ------ ----- ----- ------
12/31/2007 91.5% 90.3% 88.2% 86.0% 86.8% 87.8% 90.2%
03/31/2008 91.6 90.5 88.4 86.5 87.6 87.9 90.4
06/30/2008 91.6 90.7 87.9 86.2 87.5 88.1 90.4
09/30/2008 91.7 91.0 87.8 86.0 87.2 88.2 90.5
12/31/2008 91.8 91.1 87.6 85.6 86.6 88.5 90.6
03/31/2009 91.9 91.4 87.5 85.7 86.3 88.8 90.8
06/30/2009 91.9 91.6 87.3 85.2 85.7 89.1 90.8
09/30/2009 91.9 91.4 87.0 84.9 85.8 88.8 90.7
12/31/2009 91.9 91.2 87.1 84.9 85.6 88.8 90.6
CML* = Commercial
Average premium per policy trends for Property and Casualty Group
insurance operations by major lines of business:
-----------------------------------------------------------------
Private 12-mth. 12-mth.
Passenger percent Home- percent
Date Auto change owners change
---- ---- ------ ------ ------
12/31/2007 $1,092 (1.6)% $518 (1.5)%
03/31/2008 1,091 (0.8) 518 (1.1)
06/30/2008 1,088 (0.5) 514 (1.2)
09/30/2008 1,086 (0.6) 511 (1.5)
12/31/2008 1,085 (0.6) 511 (1.4)
03/31/2009 1,081 (0.9) 512 (1.2)
06/30/2009 1,076 (1.1) 516 0.4
09/30/2009 1,076 (0.9) 520 1.8
12/31/2009 1,079 (0.6) 526 2.9
All Other 12-mth. Total 12-mth.
Personal percent Personal percent
Date Lines change Lines change
---- ----- ------ ----- ------
12/31/2007 $353 1.1% $782 (1.9)%
03/31/2008 354 1.4 781 (1.3)
06/30/2008 353 0.6 777 (1.1)
09/30/2008 354 0.6 774 (1.1)
12/31/2008 356 0.8 773 (1.2)
03/31/2009 358 1.1 771 (1.3)
06/30/2009 359 1.7 769 (1.0)
09/30/2009 359 1.4 770 (0.5)
12/31/2009 360 1.1 773 0.1
12-mth. 12-mth.
percent Workers percent
Date CML* Auto change Comp. change
---- --------- ------ ----- ------
12/31/2007 $2,577 (4.1)% $5,602 (6.4)%
03/31/2008 2,568 (3.6) 5,453 (7.8)
06/30/2008 2,530 (3.7) 5,236 (11.3)
09/30/2008 2,514 (3.3) 5,067 (12.3)
12/31/2008 2,505 (2.8) 4,951 (11.6)
03/31/2009 2,483 (3.3) 4,792 (12.1)
06/30/2009 2,439 (3.6) 4,555 (13.0)
09/30/2009 2,420 (3.7) 4,354 (14.1)
12/31/2009 2,395 (4.4) 4,223 (14.7)
All Other 12-mth. Total 12-mth.
CML* percent CML* percent
Date Lines change Lines change
---- ----- ------ ----- ------
12/31/2007 $1,581 (4.6)% $2,262 (5.5)%
03/31/2008 1,576 (4.0) 2,240 (5.3)
06/30/2008 1,546 (4.3) 2,187 (6.3)
09/30/2008 1,536 (3.5) 2,157 (6.0)
12/31/2008 1,533 (3.0) 2,141 (5.3)
03/31/2009 1,537 (2.5) 2,122 (5.3)
06/30/2009 1,511 (2.3) 2,067 (5.5)
09/30/2009 1,496 (2.6) 2,030 (5.9)
12/31/2009 1,495 (2.5) 2,010 (6.1)
12-mth.
Total percent
Date All Lines change
---- --------- ------
12/31/2007 $973 (2.8)%
03/31/2008 969 (2.2)
06/30/2008 960 (2.4)
09/30/2008 953 (2.6)
12/31/2008 949 (2.5)
03/31/2009 944 (2.6)
06/30/2009 936 (2.5)
09/30/2009 932 (2.2)
12/31/2009 932 (1.9)
CML* = Commercial
Property & Casualty Group Adjusted
Combined Ratio by Major Lines of
Business (SAP Basis) - Direct Business
Three Months ended December 31, 2009
------------------------------------
Prior Year**
Reserve
Development Current
Deficiency Accident
(Redundancy) Year
Calendar* (Direct Catastrophe Excluding
Year business) Losses Catastrophes
---- ---------- ------ ------------
Private passenger
auto 115.4% 11.0% 0.2% 104.2%
Homeowners 79.8% 3.9% 8.2% 67.7%
Other personal lines 64.9% (8.1)% 1.9% 71.1%
Total personal
lines 103.0% 8.1% 2.5% 92.4%
Commercial
multi-peril 119.8% 34.0% 0.8% 85.0%
Commercial auto 83.3% (7.1)% 0.0% 90.4%
Workers compensation (68.4)% (157.9)% 0.0% 89.5%
Other commercial
lines 38.2% (37.1)% 0.2% 75.1%
Total commercial
lines 60.0% (27.1)% 0.4% 86.7%
Grand total - direct
business only 91.0% (1.6)% 2.0% 90.6%
Three Months ended December 31, 2008
------------------------------------
Prior Year**
Reserve
Development Current
Deficiency Accident
(Redundancy) Year
Calendar* (Direct Catastrophe Excluding
Year business) Losses Catastrophes
---- ---------- ------ ------------
Private passenger
auto 103.0% (0.2)% 0.1% 103.1%
Homeowners 73.9% 0.7% 1.3% 71.9%
Other personal lines 15.7% (60.2)% 1.6% 74.3%
Total personal
lines 91.0% (2.7)% 0.5% 93.2%
Commercial
multi-peril 69.7% (21.3)% 4.1% 86.9%
Commercial auto 85.4% (4.2)% 0.0% 89.6%
Workers compensation 74.9% (19.2)% 0.0% 94.1%
Other commercial
lines 223.8% 129.8% 0.5% 93.5%
Total commercial
lines 86.5% (5.1)% 1.6% 90.0%
Grand total - direct
business only 89.6% (3.4)% 0.8% 92.2%
Twelve Months Ended December 31, 2009
-------------------------------------
Prior Year**
Reserve
Development Current
Deficiency Accident
(Redundancy) Year
Calendar* (Direct Catastrophe Excluding
Year business) Losses Catastrophes
---- ---------- ------ ------------
Private passenger
auto 99.5% 4.3% 0.5% 94.7%
Homeowners 98.3% 2.6% 12.3% 83.4%
Other personal lines 74.0% (7.8)% 3.8% 78.0%
Total personal
lines 98.0% 3.2% 4.0% 90.8%
Commercial
multi-peril 111.5% 16.0% 4.1% 91.4%
Commercial auto 78.0% (9.9)% 0.9% 87.0%
Workers compensation 45.0% (52.5)% 0.0% 97.5%
Other commercial
lines 56.1% (21.4)% 0.6% 76.9%
Total commercial
lines 82.2% (10.3)% 1.9% 90.6%
Grand total - direct
business only 93.5% (0.6)% 3.4% 90.7%
Twelve Months Ended December 31, 2008
-------------------------------------
Prior Year**
Reserve
Development Current
Deficiency Accident
(Redundancy) Year
Calendar* (Direct Catastrophe Excluding
Year business) Losses Catastrophes
---- ---------- ------ ------------
Private passenger
auto 88.6% (4.3)% 0.6% 92.3%
Homeowners 92.2% (2.3)% 12.0% 82.5%
Other personal lines 60.0% (20.3)% 4.8% 75.5%
Total personal
lines 88.3% (4.5)% 4.0% 88.8%
Commercial
multi-peril 93.0% (5.3)% 4.5% 93.8%
Commercial auto 80.7% (6.0)% 0.5% 86.2%
Workers compensation 99.0% (0.1)% 0.0% 99.1%
Other commercial
lines 137.5% 50.0% 0.4% 87.1%
Total commercial
lines 94.2% (0.3)% 1.9% 92.6%
Grand total - direct
business only 90.1% (3.2)% 3.4% 89.9%
* The calendar year combined ratio represents the adjusted statutory
combined ratio, which removes the profit component of the management
fee earned by the Company.
** The prior accident year reserve development does not include the
effects of salvage and subrogation.
SOURCE Erie Indemnity Company
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