In its first quarter financial report, Erie Indemnity Co. revealed that net income was $56.4 million, a 13.9 percent increase from $49.5 million for the same period in 2006. Net income per share-diluted increased to $0.88 per share, compared to $0.73 per share in the comparable quarter in 2006.
Net operating income per share increased by 18.9 percent to $0.86 per share in the first quarter of 2007, from $0.72 per share, for the same period one year ago.
The GAAP combined ratio was 89.2 in the first quarter of 2007 compared to 86.5 in the first quarter of 2006.
According to Jeffrey A. Ludrof, president and chief executive office, investment operations delivered strong results, and Erie agents increased policies in force by nearly 13,500 policies, while the retention rate improved to 89.7 percent.
Direct written premiums of the property and casualty group decreased 2.6 percent to $918.2 million in the first quarter 2007, from $942.8 million in the first quarter of 2006. An increase to the management fee rate in 2007 to 25 percent, from 24.75 percent in 2006, offset some of the decline in direct written premiums. This higher management fee rate in 2007 increased management fee revenue by $2.3 million, or $0.02 per share-diluted for the quarter ended March 31, 2007.
The property and casualty group has been implementing rate reductions to be more price competitive, which resulted in a $34 million decrease in written premiums in the first quarter of 2007. An additional $45 million in rate reductions are forecast for the remainder of the year. The most significant rate reductions have been in the group’s largest line of business, private passenger auto.
In addition to rate reductions, the company continues to expand its agency force to support its growth goals. Through the first quarter of 2007 the company appointed 66 new agencies. Consolidations and terminations within Erie’s agency force resulted in a net increase of 38 producing agencies during the first quarter, bringing our total of producing agencies to 1,832 at March 31, 2007. The company expects to meet its goal of 200 new agency appointments during 2007. In 2006, the company appointed 139 new agencies.
The company’s share of catastrophe losses amounted to $0.3 million in each of the first quarters of 2007 and 2006. These catastrophe losses contributed 0.5 points and 0.6 points to the GAAP combined ratio in the first quarters of 2007 and 2006, respectively.
Net revenue from investment operations increased 44.6 percent in the first quarter of 2007 to $29.8 million compared to $20.6 million in the first quarter of 2006.
Source: Erie Insurance Group