Problems on Wall Street meant slipping profits at Erie Indemnity Co, as its third quarter net income fell to $4.2 million — down 92 percent from the $53.5 million earned in the same period last year.
“Our financial performance in the third quarter was reflective of the condition of the global economic environment,” said Terrence W. Cavanaugh, president and chief executive officer of the Pennsylvania-based company. “While we recognize the impacts of the significant disruption in the securities markets on our investment operations this quarter, the company continues to generate strong cash flows from operations and maintains substantial balance sheet liquidity.”
The big impact on the bottom line came from $41.4 million worth of realized losses on investments.
There were some encouraging signs, however. Over the first nine months of 2008, Erie’s Property & Casualty Group grew by almost 93,000 policies in force over year-end 2007 levels, and the company’s retention ratio stood at 90.5 percent. Cavanaugh said those signs were among the “positive growth indicators that position the Erie Indemnity Co. well in this challenging and competitive environment.”
Compared with the third quarter of 2007, Erie saw its operating revenues grow $3 million to $294.5 million. Expenses, meanwhile, climbed by $24,000 to $244.8 million.
Gross margins were 19.3 percent in the third quarter of 2008, compared with 16 percent in the third quarter of 2007. The combined ratio was 99.4 in the third quarter of 2008 compared to 88.0 in the third quarter of 2007, driven by higher catastrophe losses from Hurricane Ike.
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