Erie Indemnity (ERIE) 8-K Erie Indemnity Reports Full Year and Fourth Quarter 2016 Results

Exhibit 99.2

Erie Indemnity Company

Statements of Operations

(dollars in thousands, except per share data)

	Three months ended December 31,						Twelve months ended December 31,
	2016			2015			2016			2015
	(Unaudited)
Operating revenue
Management fee revenue, net	$	372,169		$	348,885		$	1,567,431		$	1,475,511
Service agreement revenue	7,444			7,495			29,200			29,997
Total operating revenue	379,613			356,380			1,596,631			1,505,508
Operating expenses
Commissions	216,837			206,691			893,800			847,880
Salaries and employee benefits	51,777			55,998			213,356			226,713
All other operating expenses	54,314			51,852			197,111			198,374
Total operating expenses	322,928			314,541			1,304,267			1,272,967
Net revenue from operations	56,685			41,839			292,364			232,541
Investment income
Net investment income	5,663			4,469			20,547			17,791
Net realized gains on investments	643			617			672			492
Net impairment losses recognized in earnings	(71		)	(923		)	(416		)	(1,558		)
Equity in earnings of limited partnerships	7,304			81			7,025			16,983
Total investment income	13,539			4,244			27,828			33,708
Interest expense, net	101			—			101			—
Income before income taxes	70,123			46,083			320,091			266,249
Income tax expense	24,337			15,950			109,725			91,571
Net income	$	45,786		$	30,133		$	210,366		$	174,678
Earnings Per Share
Net income per share
Class A common stock – basic	$	0.98		$	0.65		$	4.52		$	3.75
Class A common stock – diluted	$	0.87		$	0.57		$	4.01		$	3.33
Class B common stock – basic	$	147		$	97		$	678		$	563
Class B common stock – diluted	$	147		$	97		$	677		$	562
Weighted average shares outstanding – Basic
Class A common stock	46,188,895			46,179,559			46,188,952			46,186,671
Class B common stock	2,542			2,542			2,542			2,542
Weighted average shares outstanding – Diluted
Class A common stock	52,413,119			52,506,600			52,435,303			52,498,811
Class B common stock	2,542			2,542			2,542			2,542
Dividends declared per share
Class A common stock	$	0.7825		$	0.7300		$	2.9725		$	2.7730
Class B common stock	$	117.375		$	109.500		$	445.875		$	415.950

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Erie Indemnity Company

Reconciliation of Net Income to Operating Income

Reconciliation of net income to operating income

We disclose operating income, a non-GAAP financial measure, to enhance our investors’ understanding of our performance.  Our method of calculating this measure may differ from those used by other companies, and therefore comparability may be limited.

We define operating income as net income excluding realized capital gains and losses, impairment losses, and related federal income taxes.

We use operating income to evaluate the results of our operations.  It reveals trends 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 which are not related to our ongoing operations.  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 prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and does not reflect our overall profitability.

The following table reconciles net income and operating income:

	Three months ended December 31,						Twelve months ended December 31,
(in thousands, except per share data)	2016			2015			2016			2015
	(Unaudited)
Net income	$	45,786		$	30,133		$	210,366		$	174,678
Net realized (gains) losses and impairments on investments	(572		)	306			(256		)	1,066
Income tax expense (benefit)	199			(107		)	89			(373		)
Realized (gains) losses and impairments, net of income taxes	(373		)	199			(167		)	693
Operating income	$	45,413		$	30,332		$	210,199		$	175,371
Per Class A common share-diluted:
Net income	$	0.87		$	0.57		$	4.01		$	3.33
Net realized (gains) losses and impairments on investments	0.00			0.01			0.00			0.02
Income tax expense (benefit)	0.00			0.00			0.00			(0.01		)
Realized (gains) losses and impairments, net of income taxes	0.00			0.01			0.00			0.01
Operating income	$	0.87		$	0.58		$	4.01		$	3.34

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Erie Indemnity Company

Statements of Financial Position

(in thousands)

	December 31, 2016		December 31, 2015
Assets
Current assets:
Cash and cash equivalents	$	189,072	$	182,889
Available-for-sale securities	56,138		62,067
Receivables from Erie Insurance Exchange and affiliates	378,540		348,055
Prepaid expenses and other current assets	30,169		24,697
Federal income taxes recoverable	5,260		11,947
Accrued investment income	6,337		5,491
Total current assets	665,516		635,146
Available-for-sale securities	657,153		537,874
Limited partnership investments	58,159		88,535
Fixed assets, net	69,142		59,087
Deferred income taxes, net	53,889		40,686
Note receivable from Erie Family Life Insurance Company	25,000		25,000
Other assets	20,096		20,968
Total assets	$	1,548,955	$	1,407,296
Liabilities and shareholders' equity
Current liabilities:
Commissions payable	$	210,559	$	195,542
Agent bonuses	114,772		106,752
Accounts payable and accrued liabilities	88,153		88,532
Dividends payable	36,441		33,996
Deferred executive compensation	19,675		20,877
Total current liabilities	469,600		445,699
Defined benefit pension plan	221,827		172,700
Employee benefit obligations	756		1,234
Deferred executive compensation	13,233		16,580
Long-term borrowings	24,766		—
Other long-term liabilities	1,863		1,580
Total liabilities	732,045		637,793
Shareholders’ equity	816,910		769,503
Total liabilities and shareholders’ equity	$	1,548,955	$	1,407,296

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