-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JiQ5y6XlJhM2X5gpSd2tXoeUkoXyGWXs/lIaGUB35/q6gHGrN3qBuZ1H/MkTgSMR U4KXA09otBjiZMFXXywogg== 0000922621-03-000002.txt : 20030226 0000922621-03-000002.hdr.sgml : 20030226 20030225192243 ACCESSION NUMBER: 0000922621-03-000002 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030225 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030226 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ERIE INDEMNITY CO CENTRAL INDEX KEY: 0000922621 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 250466020 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-24000 FILM NUMBER: 03579849 BUSINESS ADDRESS: STREET 1: 100 ERIE INSURANCE PL CITY: ERIE STATE: PA ZIP: 16530 BUSINESS PHONE: 8148702000 MAIL ADDRESS: STREET 1: 100 ERIE INSURANCE PLACE CITY: ERIE STATE: PA ZIP: 16530 8-K 1 a8k1.txt FORM 8-K FILING DATED 2/25/03 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): February 25, 2003 ERIE INDEMNITY COMPANY (Exact name of registrant as specified in its charter) PENNSYLVANIA 0-24000 25-0466020 ------------------------------- ------------- ------------------- (State or other jurisdiction of (Commission (I.R.S. Employer incorporation) File Number) Identification No.) 100 Erie Insurance Place, Erie, Pennsylvania 16530 - -------------------------------------------- ---------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (814) 870-2000 1 Item 5. OTHER EVENTS. On February 25, 2003, Erie Indemnity Company issued a press release which is filed as Exhibit 99.1 hereto and is incorporated herein by reference. Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS Exhibit Number Description - -------------- ----------- 99.1 Press release dated February 25, 2003 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ERIE INDEMNITY COMPANY Erie Indemnity Company ------------------------------ (Registrant) Date: February 25, 2003 /s/ Philip A. Garcia ------------------------------- (Philip A. Garcia, Executive Vice President & CFO) 2 EXHIBIT 99.1 ERIE INDEMNITY REPORTS FOURTH QUARTER AND FULL-YEAR 2002 RESULTS Erie, Pa., Feb. 25, 2003 - Erie Indemnity Company (Nasdaq: ERIE) today announced results for the fourth quarter and full-year 2002. For the fourth quarter: o Net income increased to $33.9 million, up from $5.9 million for the same period in 2001. o Net income per share increased to $.48 per share, compared to $.08 per share in the comparable quarter for 2001. o Net income, excluding net realized losses on investments and related federal income taxes, increased to $35.6 million, up from $23.1 million for the same period one year ago. o Management fee revenue grew by 17.9 percent to $181.8 million, up from $154.2 million for the same period one year ago. The increase in fourth quarter net income was due to a combination of management fee growth (calculated on the property and casualty direct written premiums of the Erie Insurance Group) and a reduction in net realized losses on investments, compared to the same period in 2001. Fourth quarter 2001 results were affected by $26.4 million, or $.24 per share, in realized losses on investments, as well as a charge of $10.7 million, or $.10 per share, related to the retirement of former CEO Stephen Milne. For the full-year 2002 results, Erie Indemnity reported: o Net income was up by 40.8 percent to $172.1 million, from $122.3 million at the end of 2001. o Net income per share increased to $2.42 per share at December 31, 2002, from $1.71 at year-end 2001. o Net income, excluding net realized losses on investments and related federal income taxes, grew 27.1 percent to $179.4 million. 3 "We continue to achieve strong growth in direct written premiums, which have propelled the management fee revenue increases we saw in the fourth quarter and throughout 2002," said Jeffrey A. Ludrof, president and CEO. "Our policies in force growth was strong, ending the year at 3.5 million, with commercial lines policies increasing by 13.4 percent and personal lines policies by 12.8 percent over 2001. We also saw significant increases in average written premium per policy, up nearly 10 percent in 2002 over the 2001 figure. I attribute this growth to our competitive products and pricing and our superior service." Details of Fourth Quarter 2002 Results - -------------------------------------- Management operations - --------------------- Management fee revenue increased to $181.8 million for the quarter ended December 31, 2002, from $154.2 million for the same period one year ago. The property and casualty direct written premiums of the Erie Insurance Group, upon which management fee revenue is calculated, grew 25.7 percent to $774.8 million in the fourth quarter 2002, from $616.6 million in the fourth quarter 2001. In the fourth quarter of 2002, the Company established an estimated allowance for management fees returned on mid-term cancellations. The allowance resulted in an $11.9 million reduction in management fee revenue for the quarter ended December 31, 2002, and a reduction in net income of $4.0 million, or $.06 per share, after taxes. Nonaffiliated assumed reinsurance premiums of Erie Insurance Exchange, upon which the Company receives a 7.0 percent service fee, increased to $46.7 million in the fourth quarter of 2002, up by 11.2 percent over the $42 million recorded in the fourth quarter 2001. The cost of management operations increased 6.6 percent to $136.3 million in the fourth quarter of 2002, from $127.8 million for the same period in 2001. Commission costs increased 21.3 percent to $95.7 million, from $78.9 million in the fourth quarter 2001. Commission costs grew more slowly than written premium due to a $5.8 million reduction in commission expense for returned commissions related to the allowance recorded for returned management fees on mid-term policy cancellations. Fourth quarter costs of management operations, excluding commissions, decreased 16.9 percent to $40.6 million in 2002 from $48.9 million in 2001. Included in the fourth quarter 2001 costs was a $10.7 million severance charge related to the retirement of the Company's president and chief executive officer. Excluding this charge, these costs would have increased 6.2 percent. Also included in the cost of management operations are technology hardware and infrastructure expenditures for the Erie Insurance Group eCommerce program. These costs amounted to $ 0.1 million and $1.1 million in the fourth quarters of 2002 and 2001, respectively. 4 Insurance underwriting operations - --------------------------------- The Company's insurance underwriting operations recorded losses of $11.2 million and $4.6 million in the fourth quarters of 2002 and 2001, respectively. During the fourth quarter of 2002, the Company's property and casualty insurance subsidiaries strengthened their loss and loss adjustment reserves by $10.1 million. Underwriting losses in the fourth quarter were negatively impacted by adverse development of loss reserves for prior accident years, principally in personal and commercial automobile coverages, as well as a fourth quarter increase to strengthen reserves in response to loss development trends. Reserve increases amounted to $6.6 million, or $.09 per share, after taxes, in the fourth quarter 2002. Approximately half of the reserve strengthening was in accident years prior to 2002. The Company's share of catastrophe losses totaled $1.6 million and $1.5 million for the three-month periods ended December 31, 2002 and 2001, respectively. These losses include catastrophe losses previously reported by the Company from tornado and hail storms in Ohio and Pennsylvania, and ice storms in North Carolina during the fourth quarter 2002. Included in the Company's policy acquisition and other underwriting expenses is the property and casualty insurance subsidiaries' share of software development costs related to the eCommerce initiative and charges related to guaranty fund assessments. Costs associated with the eCommerce initiative totaled $0.9 million and $0.7 million for the fourth quarters of 2002 and 2001, respectively. These costs will continue to be incurred as the program develops through 2004. A charge of $0.6 million for state guaranty fund assessments related to the insolvency of the Pennsylvania Hospital Insurance Company (PHICO) was taken in December 2002. The 2001 expenses include a charge of $1.7 million related to the insolvency of the Reliance Insurance Company. Investment operations - --------------------- Net revenue from investment operations for the fourth quarter of 2002 reflects income of $8.0 million, compared to a loss of $19.2 million for the same period in 2001. Increases made in net investment income and equity in earnings of Erie Family Life Insurance Company (EFL), as well as decreased net realized losses on investments, were all contributing factors to the fourth quarter increase. Net investment income increased by 13.1 percent to $14.7 million for the quarter ended December 31, 2002, from $13.0 million for the same period in 2001 primarily as the result of increases in investments in taxable bonds. Net realized losses on investments of $2.6 million were recorded during the fourth quarter of 2002 compared to net realized losses of $26.4 million for the fourth quarter of 2001. In the fourth quarter 2002, the Company recorded impairment charges of $7.7 million related to fixed income and equity security investments, in which declines in value were considered to be other-than-temporary. These impairment charges were offset by net realized gains from the sale of investments of $5.1 million. Included in the 2001 realized losses were sales of investments in a loss position and impairment charges totaling $26.4 million. These sales were part of a tax-selling strategy and produced a recovery of $9.1 million of federal income taxes relating to taxes paid in 2000, 1999 and 1998. 5 Equity in losses of limited partnerships was $4.8 million and $4.0 million for the fourth quarters of 2002 and 2001, respectively. Private equity and fixed income limited partnerships incurred realized losses of $5.4 million and $4.1 million in the fourth quarters of 2002 and 2001, respectively. Real estate limited partnerships reflected earnings of $0.6 million for the quarter ended December 31, 2002 compared to earnings of $0.1 million for the same period in 2001. Included in the private equity partnership losses are impairment charges totaling $5.5 million and $2.7 million in the fourth quarters of 2002 and 2001, respectively. The Company's earnings from its 21.6 percent equity ownership of EFL increased $2.4 million to $0.6 million for the fourth quarter of 2002 from a loss in the fourth quarter 2001. Details of 2002 Year-End Results - -------------------------------- Management operations - --------------------- Management fee revenue for 2002 was up 22.2 percent to $775.7 million. For the years ended December 31, 2002 and 2001, the property and casualty direct written premiums of the Erie Insurance Group totaled $3.2 billion and $2.5 billion, respectively, an increase of 24.0 percent. Increases in average premium per policy, continued improvements in new policy growth and increased policy retention rates -- a retention ratio of 91.2 at year end -- were all contributing factors in the growth. Firming pricing for commercial and personal insurance has allowed the Erie Insurance Group to more adequately price its products. Premium increases anticipated in 2003, due to pricing actions contemplated, filed and awaiting approval, or approved through December 31, 2002, amount to approximately $200 million in premium for the Erie Insurance Group. The majority of the anticipated increase stems from the private passenger automobile, commercial automobile, and homeowners lines of business. Nonaffiliated assumed reinsurance premiums of Erie Insurance Exchange, upon which the Company receives a 7.0 percent service fee, increased to $183.2 million for 2002, up by 14.0 percent over the $160.7 million for 2001. Costs of management operations increased by 16.7 percent at year-end 2002 compared to 14.9 percent a year earlier. Commission costs - which make up over half of the Company's expenses -- rose 23.3 percent to $398.3 million in 2002, from $323.1 million for 2001. The cost of management operations, excluding commission costs, increased 3.0 percent in 2002 to $159.1 million from $154.5 million in 2001, due primarily to increases in personnel and information technology costs. Personnel costs increased 8.4 percent in 2002 compared to 2001, excluding the $10.7 million charge related to the retirement of the Company's president and chief executive officer in January 2002. Increased personnel costs in 2002 were driven by increased staffing levels. As mentioned previously, information technology hardware and infrastructure expenditures related to the eCommerce program are included in the cost of management operations. These costs totaled $2.6 million in 2002 and $1.6 million in 2001. 6 Insurance underwriting operations - --------------------------------- Underwriting losses for the year were greater than anticipated. The Company's 5.5 percent share of Erie Insurance Group's underwriting losses totaled $27.1 million in 2002, compared to $20.5 million in 2001. These losses stem from greater than average catastrophe losses, adverse development of losses from prior accident years, which are reflected in the corresponding reserve strengthening taken in the fourth quarter, as well as eCommerce program costs and the guaranty fund charge in the fourth quarter for the PHICO insolvency. The Company is addressing underwriting loss trends by controlling exposure growth, improving underwriting risk selection, instituting programs to control loss severity and obtaining additional premium on risks through rate increases. The Company's share of catastrophe losses totaled $7.1 million and $1.6 million, for the years ended December 31, 2002 and 2001, respectively. Recoveries under an excess-of-loss reinsurance agreement with the Exchange for the year totaled $8.8 million and $7.2 million for 2002 and 2001, respectively. For the 12 months ended December 31, 2002 and 2001, the Company's policy acquisition and other underwriting expenses were also impacted by the property and casualty insurance subsidiaries' share of costs related to the eCommerce initiative. These costs totaled $3.9 million and $1.3 million, respectively. Investment operations - --------------------- For the year ended December 31, 2002, net revenue from investment operations increased by $23.5 million to $42.3 million compared to $18.8 million for the same period in 2001. The increase in net revenue from investment operations from 2001 to 2002 is primarily due to the $17.9 million decrease in realized losses from 2001 to 2002. Net realized losses on investments were $11.2 million and $29.1 million for the years ended December 31, 2002 and 2001, respectively. In 2002, net realized losses included $25.4 million in impairment charges related primarily to bonds in the communications and energy segments. Of the $25.4 million in impairments, $4.8 million related to equity securities and $20.6 million related to fixed income securities. Net investment income totaled $55.4 million for the year ended December 31, 2002 and $49.9 million for 2001, up 11.1 percent from 2001. Included in net investment income are primarily interest and dividends on the Company's fixed maturity and equity security portfolios. Increases in investments in taxable bonds contributed to the growth in net investment income in 2002. For the year ended December 31, 2002, equity in losses in limited partnerships amounted to $3.7 million, compared to losses of $2.7 million 2001. Equity in earnings of EFL was $1.7 million in 2002, compared to $0.8 million for the same period in 2001. Erie Indemnity Company provides management services to the member companies of the Erie Insurance Group, which includes the Erie Insurance Exchange, Flagship City Insurance Company, Erie Insurance Company, Erie Insurance Property and Casualty Company, Erie Insurance Company of New York and Erie Family Life Insurance Company. 7 According to A.M. Best Company, Erie Insurance Group, based in Erie, Pennsylvania, is the 17th largest automobile insurer in the United States based on direct premiums written and the 25th 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 more than 3.5 million policies in force and operates in 11 states and the District of Columbia. News releases and more information about Erie Insurance Group are available at http://www.erieinsurance.com - ---------------------------- "Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995: Certain forward-looking statements contained herein involve risks and uncertainties. These statements include certain discussions relating to underwriting, premium and investment income volume, business strategies, profitability and business relationships and the Company's other business activities during 2002 and beyond. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "could," "would," "expect," "plan," "intend," "anticipate," "believe," "estimate," "project," "predict," "potential" and similar expressions. These forward-looking statements reflect the Company's current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties that may cause results to differ materially from those anticipated in those statements. Many of the factors that will determine future events or achievements are beyond our ability to control or predict. STATEMENTS OF OPERATIONS AND FINANCIAL POSITION AND OTHER INFORMATION WILL FOLLOW 8 Erie Indemnity Company CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except per share data) Three months ended Twelve months ended December 31 December 31 2002 2001 2002 2001 ------------------------------------------------ OPERATING REVENUES: Management fee revenue $ 181,805 $ 154,161 $ 775,700 $ 634,966 Premiums earned 44,134 36,791 163,958 137,648 Service agreement revenue 7,419 6,908 23,729 27,247 ------------------------------------------------ Total operating revenue $ 233,358 $ 197,860 $ 963,387 $ 799,861 ------------------------------------------------ OPERATING EXPENSES: Cost of management operations $ 136,348 $ 127,849 $ 557,445 $ 477,645 Losses and loss adjustment expenses incurred 40,794 29,127 139,225 117,201 Policy acquisition and other underwriting expenses 14,522 12,214 51,865 40,910 ------------------------------------------------ Total operating expenses $ 191,664 $ 169,190 $ 748,535 $ 635,756 ------------------------------------------------ OTHER INCOME AND EXPENSES: Investment income, net of expenses $ 14,735 $ 13,029 $ 55,440 $ 49,884 Net realized losses on investments (2,609) (26,420) (11,237) (29,146) Equity in losses of limited partnerships (4,764) (4,019) (3,654) (2,740) ------------------------------------------------ Total other income and expenses $ 7,362 $ (17,410) $ 40,549 $ 17,998 ------------------------------------------------ Income before income taxes and equity in earnings of Erie Family Life Insurance Company $ 49,056 $ 11,260 $ 255,401 $ 182,103 Less: Provision for income taxes 15,716 3,725 84,886 60,561 Equity in earnings (losses) of Erie Family Life Insurance Company, net of tax 596 (1,618) 1,611 719 ------------------------------------------------ Net income $ 33,936 $ 5,917 $ 172,126 $ 122,261 ================================================ Net income per share $ 0.48 $ 0.08 $ 2.42 $ 1.71 ================================================ Weighted average shares outstanding 70,997 71,225 71,081 71,342 ================================================
9 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 2002 2001 2002 2001 -------------------------------------------------- MANAGEMENT OPERATIONS: Management fee revenue $ 181,805 $ 154,161 $ 775,700 $ 634,966 Service agreement revenue 7,419 6,908 23,729 27,247 -------------------------------------------------- Total revenue from management operations 189,224 161,069 $ 799,429 $ 662,213 Cost of management operations 136,348 127,849 557,445 477,645 -------------------------------------------------- Income from management operations $ 52,876 $ 33,220 $ 241,984 $ 184,568 -------------------------------------------------- INSURANCE UNDERWRITING OPERATIONS: Premiums earned $ 44,134 $ 36,791 $ 163,958 $ 137,648 -------------------------------------------------- Losses and loss adjustment expenses incurred 40,794 29,127 $ 139,225 $ 117,201 Policy acquisition and other underwriting expenses 14,522 12,214 51,865 40,910 -------------------------------------------------- Total losses and expenses $ 55,316 $ 41,341 $ 191,090 $ 158,111 -------------------------------------------------- Underwriting loss $ (11,182) $ (4,550) $ (27,132) $ (20,463) -------------------------------------------------- INVESTMENT OPERATIONS: Net investment income $ 14,735 $ 13,029 $ 55,440 $ 49,884 Net realized losses on investments (2,609) (26,420) (11,237) (29,146) Equity in losses of limited partnerships (4,764) (4,019) (3,654) (2,740) Equity in earnings (losses) of Erie Family Life Insurance Company 641 (1,740) 1,732 773 -------------------------------------------------- Net revenue (loss) from investment operations $ 8,003 $ (19,150) $ 42,281 $ 18,771 -------------------------------------------------- Income before income taxes $ 49,697 $ 9,520 $ 257,133 $ 182,876 Provision for income taxes 15,761 3,603 85,007 60,615 -------------------------------------------------- Net income $ 33,936 $ 5,917 $ 172,126 $ 122,261 ================================================== Net income per share $ 0.48 $ 0.08 $ 2.42 $ 1.71 ================================================== Net income excluding net realized losses and related taxes $ 35,632 $ 23,090 $ 179,430 $ 141,206 ================================================== DIVIDENDS DECLARED Class A non-voting common $ 0.19 0.17 $ 0.70 $ 0.63 -------------------------------------------------- Class B common $ 28.50 25.50 $ 105.00 $ 94.13 -------------------------------------------------- WEIGHTED AVERAGE SHARES OUTSTANDING 70,997 71,225 71,081 71,342 ==================================================
The table below reconciles the Company's GAAP-basis net income to net income excluding net realized losses and related income taxes. Management believes this measure assists the financial statement reader in interpreting and evaluating the financial results of the Company by removing the effects of gains and losses from investment sales, which could significantly impact the Company's financial results from one period to another based on the timing of investment sales, which may or may not be recurring. Three months ended Twelve months ended December 31 December 31 2002 2001 2002 2001 -------------------------------------------------- Net income $ 33,936 $ 5,917 $ 172,126 $ 122,261 Net realized losses on investments 2,609 26,420 11,237 29,146 Income benefit on realized losses (913) (9,247) (3,933) (10,201) -------------------------------------------------- Realized losses net of income tax benefit 1,696 17,173 7,304 18,945 -------------------------------------------------- Net income excluding net realized losses and related taxes $ 35,632 $ 23,090 $ 179,430 $ 141,206 ==================================================
10 Erie Indemnity Company CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Amounts in thousands, except per share data) December 31 December 31 2002 2001 --------------------------- ASSETS Fixed maturities $ 708,068 $ 559,873 Equity securities Preferred stock 157,563 130,007 Common stock 36,515 63,791 Other invested assets 96,613 87,296 --------------------------- Total investments $ 998,759 $ 840,967 --------------------------- Cash and cash equivalents $ 85,712 $ 88,213 Equity in Erie Family Life Insurance Company 48,545 44,683 Premiums receivable from policyholders 239,704 186,175 Receivables from affiliates 829,049 640,655 Other assets 155,907 183,677 --------------------------- Total assets $ 2,357,676 $ 1,984,370 =========================== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Unpaid losses and loss adjustment expenses $ 717,015 $ 557,278 Unearned premiums 393,091 311,969 Other liabilities 260,198 249,868 --------------------------- Total liabilities $ 1,370,304 $ 1,119,115 Total shareholders' equity $ 987,372 $ 865,255 --------------------------- Total liabilities and shareholders' equity $ 2,357,676 $ 1,984,370 =========================== Book value per share $13.91 $12.15 Shares outstanding 70,997 71,204
11 ERIE INDEMNITY COMPANY Segment Information Management fee revenue by line of business (before consideration of premium cancellation allowance): Three Months Ended % Twelve Months Ended % December 31 Change December 31 Change -------------------------------------------------------------------------- 2002 2001 2002 2001 Private Passenger Auto $ 100,640 $ 83,579 20.4% $ 414,426 $ 346,480 19.6% Commercial Auto 16,213 12,779 26.9 67,097 52,742 27.2 Homeowners 31,943 25,167 26.9 123,960 101,540 22.1 Commercial Multi-Peril 21,603 14,999 44.0 83,974 59,618 40.9 Workers' Compensation 15,678 11,916 31.6 67,851 50,745 33.7 All Other Lines of Business 7,628 5,721 33.3 30,292 23,841 27.1 -------------------------------------------------------------------------- Total $ 193,705 $ 154,161 25.7% $ 787,600 $ 634,966 24.0% --------------------------------------------------------------------------
Growth rate of policies in force for Property and Casualty Group insurance operations: All other Private 12-mth. 12-mth. lines of 12-mth. Total 12-mth. passenger growth growth personal growth Personal growth Date auto rate Homeowners rate business rate Lines rate ------------------------------------------------------------------------------------------------------ 12/31/2000 1,337,280 4.9% 986,654 7.5% 192,909 10.3% 2,516,843 6.3% 03/31/2001 1,356,651 5.3 1,003,517 7.7 197,849 10.7 2,558,017 6.7 06/30/2001 1,382,419 5.9 1,029,339 8.1 204,614 10.9 2,616,372 7.1 09/30/2001 1,408,092 6.3 1,053,014 8.4 210,220 11.4 2,671,326 7.5 12/31/2001 1,432,747 7.1 1,075,816 9.0 215,134 11.5 2,723,697 8.2 03/31/2002 1,469,617 8.3 1,104,806 10.1 222,061 12.2 2,796,484 9.3 06/30/2002 1,512,335 9.4 1,146,639 11.4 231,951 13.4 2,890,925 10.5 09/30/2002 1,554,425 10.4 1,190,651 13.1 240,410 14.4 2,985,486 11.8 12/31/2002 1,591,161 11.1 1,230,895 14.4 249,544 16.0 3,071,600 12.8 All other 12-mth. CML* 12-mth. 12-mth. lines of 12-mth. Total 12-mth. CML* growth multi- growth Workers' growth commercial growth Commercial growth auto rate peril rate comp. rate business rate Lines rate ---------------------------------------------------------------------------------------------------------------------------- 12/31/2000 87,567 5.8% 148,910 10.1% 47,156 8.4% 65,077 7.1% 348,710 8.2% 03/31/2001 89,388 7.0 152,260 10.6 48,104 8.7 66,309 8.0 356,061 8.9 06/30/2001 91,794 7.9 157,804 10.8 49,711 9.5 67,964 8.9 367,273 9.5 09/30/2001 94,204 8.8 162,246 11.1 50,984 9.6 70,048 9.0 377,482 9.9 12/31/2001 96,100 9.7 166,214 11.6 52,033 10.3 71,539 9.9 385,886 10.7 03/31/2002 98,926 10.7 171,283 12.5 53,320 10.8 73,392 10.7 396,921 11.5 06/30/2002 102,447 11.6 179,761 13.9 55,607 11.9 75,884 11.7 413,699 12.6 09/30/2002 105,353 11.8 185,608 14.4 57,375 12.5 78,131 11.5 426,467 13.0 12/31/2002 108,069 12.5 190,787 14.8 58,930 13.3 79,772 11.5 437,558 13.4 12-mth. Total growth Date All lines rate ------------------------------- 12/31/2000 2,865,553 6.5% 03/31/2001 2,914,078 6.9 06/30/2001 2,983,645 7.4 09/30/2001 3,048,808 7.8 12/31/2001 3,109,583 8.5 03/31/2002 3,193,405 9.6 06/30/2002 3,304,624 10.8 09/30/2002 3,411,953 11.9 12/31/2002 3,509,158 12.8 *CML = Commercial
12 Policy retention trends for Property and Casualty Group insurance operations: Private All other passenger CML* CML* Workers' lines of Date auto auto Homeowners multi-peril comp. business Total ------------------------------------------------------------------------------------------------------------------- 12/31/2000 92.3% 89.8% 90.7% 87.9% 88.5% 87.9% 91.0% 03/31/2001 92.2 90.3 90.7 88.6 89.1 88.0 91.0 06/30/2001 92.3 90.4 90.6 88.4 88.8 88.2 91.0 09/30/2001 92.2 90.2 90.4 88.2 88.5 88.2 90.9 12/31/2001 92.2 90.5 90.2 88.0 88.4 88.2 90.9 03/31/2002 92.3 90.9 90.2 88.8 89.3 88.1 90.9 06/30/2002 92.4 91.1 90.4 89.0 89.5 88.3 91.0 09/30/2002 92.5 90.8 90.5 88.7 89.5 88.2 91.1 12/31/2002 92.6 91.0 90.5 88.7 89.4 88.5 91.2 *CML = Commercial
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 the opinion of management, 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. Years ended ------------------------------ December 31, December 31, (Statutory Accounting Basis) 2002 2001 ------------------------------ (In thousands) Premiums earned $ 2,912,147 $ 2,422,600 ----------------------------- Losses and loss adjustment expenses $ 2,566,724 $ 2,150,749 Insurance underwriting and other expenses 969,597 766,304 ----------------------------- Net underwriting loss $ (624,174) $ (494,453) Investment income (loss), net 33,650 (421,754) Federal income tax benefit (173,062) (300,257) ----------------------------- Net loss $ (417,462) $ (615,950) ============================= As of ------------------------------ December 31, December 31, (Statutory Accounting Basis) 2002 2001 ------------------------------ (In thousands) Cash and invested assets $ 5,967,051 $ 5,900,511 Total assets 7,007,803 6,998,794 Claims and unearned premium reserves 3,962,218 3,200,836 Total liabilities 4,892,032 3,953,243 Policyholders' surplus 2,115,771 3,045,551
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