ERIE, Pa., Oct. 24, 2019 /PRNewswire/ -- Erie Indemnity
Company (NASDAQ: ERIE) today
announced financial results for the quarter and nine months ending
September 30, 2019. Net income was $94.2 million, or $1.80 per diluted share, in the third quarter of
2019, compared to $80.4 million, or
$1.54 per diluted share, in the third
quarter of 2018. Net income was $257.2
million, or $4.92 per diluted
share, in the first nine months of 2019, compared to $225.9 million, or $4.32 per diluted share, in the first nine months
of 2018.
3Q and Nine Months
2019
|
(in
thousands)
|
3Q'19
|
3Q'18
|
|
2019
|
2018
|
|
Operating
income
|
$
|
105,907
|
|
$
|
96,695
|
|
|
$
|
288,639
|
|
$
|
269,585
|
|
|
Investment
income
|
13,606
|
|
8,431
|
|
|
33,053
|
|
20,801
|
|
|
Interest expense and
other income, net
|
11
|
|
655
|
|
|
637
|
|
1,708
|
|
|
Income before income
taxes
|
119,502
|
|
104,471
|
|
|
321,055
|
|
288,678
|
|
|
Income tax
expense
|
25,333
|
|
24,025
|
|
|
63,821
|
|
62,768
|
|
|
Net income
|
$
|
94,169
|
|
$
|
80,446
|
|
|
$
|
257,234
|
|
$
|
225,910
|
|
|
|
|
|
|
|
|
|
Operating income before taxes increased $9.2 million, or 9.5 percent, in the third
quarter of 2019 compared to the third quarter of 2018.
- Management fee revenue - policy issuance and renewal services
increased $23.1 million, or 5.1
percent, in the third quarter of 2019 compared to the third quarter
of 2018.
- Management fee revenue - administrative services increased
$0.9 million, or 6.7 percent, in the
third quarter of 2019 compared to the third quarter of 2018.
- Cost of operations - policy issuance and renewal
services
-
- Commissions increased $10.2
million in the third quarter of 2019 compared to the third
quarter of 2018, as a result of the 5.2 percent increase in direct
and affiliated assumed premiums written by the Exchange, partially
offset by lower agent incentive costs related to less profitable
growth, compared to the third quarter of 2018.
- Non-commission expense increased $4.6
million in the third quarter of 2019 compared to the third
quarter of 2018. Information technology costs increased
$5.4 million primarily due to
increased professional fees. Underwriting and policy processing
expense increased $1.9 million
primarily due to underwriting report costs and other policy
acquisition costs. Customer service costs increased $1.0 million primarily due to increased personnel
costs. Administrative and other expenses decreased $2.9 million primarily driven by a decrease in
long-term incentive plan cost due to a decrease in the company
stock price in the third quarter of 2019. Personnel costs in all
expense categories were impacted by lower estimated costs for
incentive plans related to underwriting performance.
- The administrative services reimbursement revenue and
corresponding cost of operations increased both total operating
revenue and total operating expenses by $142.7 million in the third quarter of 2019, but
had no net impact on operating income.
Income from investments before taxes totaled $13.6 million in the third quarter of 2019
compared to $8.4 million in the third
quarter of 2018. Earnings from limited partnerships were
$3.3 million in the third quarter of
2019 compared to $0.8 million in the
third quarter of 2018. Net realized gains increased
$1.7 million in the third quarter of
2019 compared to the third quarter of 2018. Net investment
income was $8.7 million in the third
quarter of 2019 compared to $7.7
million in the third quarter of 2018.
Nine
Months 2019 Highlights
|
Operating income before taxes increased $19.1 million, or 7.1 percent, in the first nine
months of 2019 compared to the first nine months of 2018.
- Management fee revenue - policy issuance and renewal services
increased $74.0 million, or 5.6
percent, in the first nine months of 2019 compared to the first
nine months of 2018.
- Management fee revenue allocated to administrative services
increased $2.7 million, or 6.7
percent, in the first nine months of 2019 compared to the first
nine months of 2018.
- Cost of operations - policy issuance and renewal
services
-
- Commissions increased $30.8
million in the first nine months of 2019 compared to the
first nine months of 2018, as a result of the 5.6 percent increase
in direct and affiliated assumed premiums written by the Exchange,
partially offset by lower agent incentive costs related to less
profitable growth, compared to the first nine months of 2018.
- Non-commission expense increased $26.3
million for the nine months ended September 30, 2019 compared to the same period in
2018. Information technology costs increased $17.1 million primarily due to increased
professional fees. Administrative and other expenses increased
$6.1 million primarily driven by an
increase in long-term incentive plan cost due to a higher company
stock price during the nine months ended September 30, 2019 compared to the nine months
ended September 30, 2018. Personnel
costs in all expense categories were impacted by additional bonuses
awarded to all employees of approximately $1.1 million for the nine months ended
September 30, 2019 and $4.8 million for the nine months ended
September 30, 2018.
- The administrative services reimbursement revenue and
corresponding cost of operations increased both total operating
revenue and total operating expenses by $431.3 million in the first nine months of 2019,
but had no net impact on operating income.
Income from investments before taxes totaled $33.1 million in the first nine months of 2019
compared to $20.8 million in the
first nine months of 2018. Net realized gains on investments
were $5.5 million in the first nine
months of 2019 compared to net realized losses of $0.5 million in the first nine months of
2018. Net investment income was $25.2
million in the first nine months of 2019 compared to
$21.6 million in the first nine
months of 2018, and earnings from limited partnerships were
$2.5 million in the first nine months
of 2019 compared to $0.4 million in
the first nine months of 2018.
Webcast Information
Indemnity has scheduled a
pre-recorded audio broadcast on the Web for 10:00 AM
ET on October 25, 2019. Investors may access the
pre-recorded audio broadcast by logging on to
www.erieinsurance.com.
Erie Insurance Group
According to A.M. Best
Company, Erie Insurance Group, based in Erie,
Pennsylvania, is the
9th largest homeowners insurer and
12th largest automobile insurer in the United
States based on direct premiums written and the
16th 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 5 million policies in force and operates in 12 states and
the District of Columbia. Erie Insurance Group is a
FORTUNE 500 company.
News releases and more information about Erie Insurance
Group are available at www.erieinsurance.com.
***
"Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995:
Statements contained herein
that are not historical fact are forward-looking statements and, as
such, are subject to risks and uncertainties that could cause
actual events and results to differ, perhaps materially, from those
discussed herein. Forward-looking statements relate to future
trends, events or results and 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
forward-looking statements are discussions relating to premium and
investment income, expenses, operating results, and compliance with
contractual and regulatory requirements. Forward-looking
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, in addition to
those set forth in our filings with the Securities and Exchange
Commission, that could cause actual results and future events to
differ from those set forth or contemplated in the forward-looking
statements include the following:
- dependence upon our relationship with the Exchange and the
management fee under the agreement with the subscribers at the
Exchange;
- dependence upon our relationship with the Exchange and the
growth of the Exchange, including:
-
- general business and economic conditions;
- factors affecting insurance industry competition;
- dependence upon the independent agency system; and
- ability to maintain our reputation for customer service;
- dependence upon our relationship with the Exchange and the
financial condition of the Exchange, including:
-
- the Exchange's ability to maintain acceptable financial
strength ratings;
- factors affecting the quality and liquidity of the Exchange's
investment portfolio;
- changes in government regulation of the insurance
industry;
- emerging claims and coverage issues in the industry; and
- severe weather conditions or other catastrophic losses,
including terrorism;
- costs of providing policy issuance and renewal services to the
Exchange under the subscriber's agreement;
- credit risk from the Exchange;
- ability to attract and retain talented management and
employees;
- ability to ensure system availability and effectively manage
technology initiatives;
- difficulties with technology or data security breaches,
including cyber attacks;
- ability to maintain uninterrupted business operations;
- factors affecting the quality and liquidity of our investment
portfolio;
- our ability to meet liquidity needs and access capital;
and
- outcome of pending and potential litigation.
A forward-looking statement speaks only as of the date on which
it is made and reflects our analysis only as of that date. We
undertake 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.
Erie Indemnity
Company
Statements of
Operations
(dollars in
thousands, except per share data)
|
|
|
|
Three months
ended
September 30,
|
|
Nine months
ended
September
30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(Unaudited)
|
|
(Unaudited)
|
Operating
revenue
|
|
|
|
|
|
|
|
|
Management fee
revenue - policy issuance and renewal services, net
|
|
$
|
474,427
|
|
|
$
|
451,361
|
|
|
$
|
1,385,923
|
|
|
$
|
1,311,911
|
|
Management fee
revenue - administrative services, net
|
|
14,430
|
|
|
13,521
|
|
|
42,576
|
|
|
39,894
|
|
Administrative
services reimbursement revenue
|
|
142,730
|
|
|
140,172
|
|
|
431,305
|
|
|
432,642
|
|
Service agreement
revenue
|
|
7,155
|
|
|
7,072
|
|
|
20,754
|
|
|
21,297
|
|
Total operating
revenue
|
|
638,742
|
|
|
612,126
|
|
|
1,880,558
|
|
|
1,805,744
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Cost of operations -
policy issuance and renewal services
|
|
390,105
|
|
|
375,259
|
|
|
1,160,614
|
|
|
1,103,517
|
|
Cost of operations -
administrative services
|
|
142,730
|
|
|
140,172
|
|
|
431,305
|
|
|
432,642
|
|
Total operating
expenses
|
|
532,835
|
|
|
515,431
|
|
|
1,591,919
|
|
|
1,536,159
|
|
Operating
income
|
|
105,907
|
|
|
96,695
|
|
|
288,639
|
|
|
269,585
|
|
|
|
|
|
|
|
|
|
|
Investment
income
|
|
|
|
|
|
|
|
|
Net investment
income
|
|
8,652
|
|
|
7,659
|
|
|
25,199
|
|
|
21,583
|
|
Net realized
investment gains (losses)
|
|
1,696
|
|
|
0
|
|
|
5,501
|
|
|
(497)
|
|
Net impairment losses
recognized in earnings
|
|
(31)
|
|
|
0
|
|
|
(193)
|
|
|
(646)
|
|
Equity in earnings of
limited partnerships
|
|
3,289
|
|
|
772
|
|
|
2,546
|
|
|
361
|
|
Total investment
income
|
|
13,606
|
|
|
8,431
|
|
|
33,053
|
|
|
20,801
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
111
|
|
|
709
|
|
|
832
|
|
|
1,864
|
|
Other
income
|
|
100
|
|
|
54
|
|
|
195
|
|
|
156
|
|
Income before income
taxes
|
|
119,502
|
|
|
104,471
|
|
|
321,055
|
|
|
288,678
|
|
Income tax
expense
|
|
25,333
|
|
|
24,025
|
|
|
63,821
|
|
|
62,768
|
|
Net
income
|
|
$
|
94,169
|
|
|
$
|
80,446
|
|
|
$
|
257,234
|
|
|
$
|
225,910
|
|
|
|
|
|
|
|
|
|
|
Net income per
share
|
|
|
|
|
|
|
|
|
Class A common
stock – basic
|
|
$
|
2.02
|
|
|
$
|
1.73
|
|
|
$
|
5.52
|
|
|
$
|
4.85
|
|
Class A
common stock – diluted
|
|
$
|
1.80
|
|
|
$
|
1.54
|
|
|
$
|
4.92
|
|
|
$
|
4.32
|
|
Class B common
stock – basic
|
|
$
|
303
|
|
|
$
|
259
|
|
|
$
|
829
|
|
|
$
|
728
|
|
Class B common
stock – diluted
|
|
$
|
303
|
|
|
$
|
259
|
|
|
$
|
828
|
|
|
$
|
727
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – Basic
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
46,189,006
|
|
|
46,188,941
|
|
|
46,188,767
|
|
|
46,188,522
|
|
Class B common
stock
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – Diluted
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
52,325,125
|
|
|
52,317,438
|
|
|
52,317,275
|
|
|
52,313,642
|
|
Class B common
stock
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
|
|
|
|
|
|
|
|
Dividends declared
per share
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
$
|
0.90
|
|
|
$
|
0.84
|
|
|
$
|
2.70
|
|
|
$
|
2.52
|
|
Class B common
stock
|
|
$
|
135.00
|
|
|
$
|
126.00
|
|
|
$
|
405.00
|
|
|
$
|
378.00
|
|
Erie Indemnity
Company
Statements of
Financial Position
(in
thousands)
|
|
|
|
September 30,
2019
|
|
December 31,
2018
|
|
|
(Unaudited)
|
|
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
344,872
|
|
|
$
|
266,417
|
|
Available-for-sale
securities
|
|
32,984
|
|
|
402,339
|
|
Receivables from Erie
Insurance Exchange and affiliates
|
|
497,985
|
|
|
449,873
|
|
Prepaid expenses and
other current assets
|
|
47,712
|
|
|
36,892
|
|
Federal income taxes
recoverable
|
|
6,075
|
|
|
8,162
|
|
Accrued investment
income
|
|
5,267
|
|
|
5,263
|
|
Total current
assets
|
|
934,895
|
|
|
1,168,946
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
647,649
|
|
|
346,184
|
|
Equity
securities
|
|
55,052
|
|
|
11,853
|
|
Limited partnership
investments
|
|
32,171
|
|
|
34,821
|
|
Fixed assets,
net
|
|
194,170
|
|
|
130,832
|
|
Deferred income
taxes, net
|
|
15,505
|
|
|
24,101
|
|
Other
assets
|
|
95,138
|
|
|
61,590
|
|
Total
assets
|
|
$
|
1,974,580
|
|
|
$
|
1,778,327
|
|
|
|
|
|
|
Liabilities and
shareholders' equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Commissions
payable
|
|
$
|
272,932
|
|
|
$
|
241,573
|
|
Agent
bonuses
|
|
73,921
|
|
|
103,462
|
|
Accounts payable and
accrued liabilities
|
|
131,453
|
|
|
111,291
|
|
Dividends
payable
|
|
41,913
|
|
|
41,910
|
|
Contract
liability
|
|
36,318
|
|
|
33,854
|
|
Deferred executive
compensation
|
|
10,328
|
|
|
13,107
|
|
Current portion of
long-term borrowings
|
|
1,959
|
|
|
1,870
|
|
Total current
liabilities
|
|
568,824
|
|
|
547,067
|
|
|
|
|
|
|
Defined benefit
pension plans
|
|
136,078
|
|
|
116,866
|
|
Long-term
borrowings
|
|
96,346
|
|
|
97,860
|
|
Contract
liability
|
|
18,648
|
|
|
17,873
|
|
Deferred executive
compensation
|
|
13,017
|
|
|
13,075
|
|
Other long-term
liabilities
|
|
22,396
|
|
|
11,914
|
|
Total
liabilities
|
|
855,309
|
|
|
804,655
|
|
|
|
|
|
|
Shareholders'
equity
|
|
1,119,271
|
|
|
973,672
|
|
Total liabilities
and shareholders' equity
|
|
$
|
1,974,580
|
|
|
$
|
1,778,327
|
|
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SOURCE Erie Indemnity Company