ERIE, Pa., May 7, 2020
/PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for
the quarter ending March 31, 2020. Net income was
$59.3 million, or $1.13 per diluted share, in the first quarter of
2020, compared to $75.3 million, or
$1.44 per diluted share, in the first
quarter of 2019.
On March 11, 2020, the outbreak of
the coronavirus ("COVID-19") was declared a global pandemic.
The impacts of the pandemic and efforts to mitigate the spread of
the virus have had significant adverse impacts on economic
conditions and financial markets. We did not experience
significant financial impacts on our core businesses of policy
issuance and renewal services and administrative services in the
first quarter of 2020. However, the financial market
volatility did have a significant impact on our first quarter 2020
investment portfolio.
1Q
2020
|
(in
thousands)
|
1Q'20
|
1Q'19
|
|
Operating
income
|
$
|
85,691
|
|
$
|
86,122
|
|
|
Investment (loss)
income
|
(9,195)
|
|
9,795
|
|
|
Interest expense and
other income, net
|
369
|
|
402
|
|
|
Income before income
taxes
|
76,127
|
|
95,515
|
|
|
Income tax
expense
|
16,801
|
|
20,204
|
|
|
Net income
|
$
|
59,326
|
|
$
|
75,311
|
|
|
|
|
|
|
Operating income before taxes decreased $0.4 million, or 0.5 percent, in the first
quarter of 2020 compared to the first quarter of 2019.
- Management fee revenue - policy issuance and renewal services
increased $12.8 million, or 3.0
percent, in the first quarter of 2020 compared to the first quarter
of 2019.
- Management fee revenue - administrative services increased
$0.8 million, or 5.9 percent, in the
first quarter of 2020 compared to the first quarter of 2019.
- Cost of operations - policy issuance and renewal
services
-
- Commissions increased $9.0
million in the first quarter of 2020 compared to the first
quarter of 2019. The increase was primarily driven by the growth in
direct and affiliated assumed premiums written by the Exchange of
3.5 percent in the first quarter of 2020. The estimated agent
incentive payouts at March 31, 2020
are based on actual underwriting results for the two prior years
and current year-to-date actual results and forecasted results for
the remainder of 2020. Therefore, fluctuations in the current
quarter underwriting results can impact the estimated incentive
payout on a quarter-to-quarter basis.
- Non-commission expense increased $5.0
million in the first quarter of 2020 compared to the first
quarter of 2019. Underwriting and policy processing expense
increased $3.1 million primarily due
to increased personnel costs and underwriting report costs.
Information technology costs increased $3.0
million primarily due to increased professional fees and
personnel costs. Administrative and other expenses decreased
$2.2 million primarily driven by a
decrease in long-term incentive plan cost due to a decrease in the
company stock price in the first quarter of 2020 compared to an
increase in the first quarter of 2019.
Loss from investments before taxes totaled $9.2 million in the first quarter of 2020
compared to income of $9.8 million in
the first quarter of 2019. Net realized losses were
$10.8 million in the first quarter of
2020 compared to net realized gains of $2.5
million in the first quarter of 2019 driven by decreases in
the fair value of equity securities due to significant financial
market volatility resulting from the COVID-19 pandemic. Net
impairment losses of $3.1 million in
the first quarter of 2020 were also driven by the COVID-19
pandemic's impact on the financial markets. Losses from
limited partnerships were $3.7
million in the first quarter of 2020 compared to losses of
$1.1 million in the first quarter of
2019.
Webcast Information
Indemnity has scheduled a pre-recorded audio broadcast on the
Web for 10:00 AM ET on May 8, 2020. 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 11th 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
nearly 6 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:
- potential impacts of the COVID-19 pandemic on the growth and
financial condition of the Erie Insurance Exchange
("Exchange");
- potential impacts of the COVID-19 pandemic on our operations,
the business operations of our customers and/or independent agents,
or our third-party vendor operations;
- 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;
- 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
March 31,
|
|
|
2020
|
|
2019
|
|
|
(Unaudited)
|
Operating
revenue
|
|
|
|
|
Management fee
revenue - policy issuance and renewal services, net
|
|
$
|
443,750
|
|
|
$
|
430,983
|
|
Management fee
revenue - administrative services, net
|
|
14,771
|
|
|
13,951
|
|
Administrative
services reimbursement revenue
|
|
151,554
|
|
|
142,480
|
|
Service agreement
revenue
|
|
6,662
|
|
|
6,692
|
|
Total operating
revenue
|
|
616,737
|
|
|
594,106
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
Cost of operations -
policy issuance and renewal services
|
|
379,492
|
|
|
365,504
|
|
Cost of operations -
administrative services
|
|
151,554
|
|
|
142,480
|
|
Total operating
expenses
|
|
531,046
|
|
|
507,984
|
|
Operating
income
|
|
85,691
|
|
|
86,122
|
|
|
|
|
|
|
Investment
income
|
|
|
|
|
Net investment
income
|
|
8,369
|
|
|
8,517
|
|
Net realized
investment (losses) gains
|
|
(10,806)
|
|
|
2,503
|
|
Net impairment losses
recognized in earnings
|
|
(3,053)
|
|
|
(78)
|
|
Equity in losses of
limited partnerships
|
|
(3,705)
|
|
|
(1,147)
|
|
Total investment
(loss) income
|
|
(9,195)
|
|
|
9,795
|
|
|
|
|
|
|
Interest expense,
net
|
|
3
|
|
|
449
|
|
Other (expense)
income
|
|
(366)
|
|
|
47
|
|
Income before income
taxes
|
|
76,127
|
|
|
95,515
|
|
Income tax
expense
|
|
16,801
|
|
|
20,204
|
|
Net
income
|
|
$
|
59,326
|
|
|
$
|
75,311
|
|
|
|
|
|
|
Net income per
share
|
|
|
|
|
Class A common
stock – basic
|
|
$
|
1.27
|
|
|
$
|
1.62
|
|
Class A
common stock – diluted
|
|
$
|
1.13
|
|
|
$
|
1.44
|
|
Class B common
stock – basic and diluted
|
|
$
|
191
|
|
|
$
|
243
|
|
|
|
|
|
|
Weighted average
shares outstanding – Basic
|
|
|
|
|
Class A common
stock
|
|
46,188,789
|
|
|
46,188,337
|
|
Class B common
stock
|
|
2,542
|
|
|
2,542
|
|
|
|
|
|
|
Weighted average
shares outstanding – Diluted
|
|
|
|
|
Class A common
stock
|
|
52,324,350
|
|
|
52,312,036
|
|
Class B common
stock
|
|
2,542
|
|
|
2,542
|
|
|
|
|
|
|
Dividends declared
per share
|
|
|
|
|
Class A common
stock
|
|
$
|
0.965
|
|
|
$
|
0.90
|
|
Class B common
stock
|
|
$
|
144.75
|
|
|
$
|
135.00
|
|
Erie Indemnity
Company Statements of Financial Position (in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2020
|
|
December 31,
2019
|
|
|
(Unaudited)
|
|
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
228,646
|
|
|
$
|
336,739
|
|
Available-for-sale
securities
|
|
34,818
|
|
|
32,810
|
|
Equity
securities
|
|
0
|
|
|
2,381
|
|
Receivables from Erie
Insurance Exchange and affiliates, net
|
|
482,238
|
|
|
468,636
|
|
Prepaid expenses and
other current assets
|
|
58,715
|
|
|
44,943
|
|
Federal income taxes
recoverable
|
|
0
|
|
|
462
|
|
Accrued investment
income
|
|
5,657
|
|
|
5,433
|
|
Total current
assets
|
|
810,074
|
|
|
891,404
|
|
|
|
|
|
|
Available-for-sale
securities, net
|
|
716,835
|
|
|
697,891
|
|
Equity
securities
|
|
58,014
|
|
|
64,752
|
|
Limited partnership
investments
|
|
22,492
|
|
|
26,775
|
|
Fixed assets,
net
|
|
238,296
|
|
|
221,379
|
|
Agent loans,
net
|
|
59,877
|
|
|
60,978
|
|
Deferred income
taxes, net
|
|
19,281
|
|
|
17,186
|
|
Other
assets
|
|
32,624
|
|
|
35,875
|
|
Total
assets
|
|
$
|
1,957,493
|
|
|
$
|
2,016,240
|
|
|
|
|
|
|
Liabilities and
shareholders' equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Commissions
payable
|
|
$
|
270,328
|
|
|
$
|
262,963
|
|
Agent
bonuses
|
|
29,661
|
|
|
96,053
|
|
Accounts payable and
accrued liabilities
|
|
130,035
|
|
|
134,957
|
|
Dividends
payable
|
|
44,940
|
|
|
44,940
|
|
Contract
liability
|
|
35,810
|
|
|
35,938
|
|
Deferred executive
compensation
|
|
10,910
|
|
|
10,882
|
|
Federal income taxes
payable
|
|
18,040
|
|
|
0
|
|
Current portion of
long-term borrowings
|
|
2,000
|
|
|
1,979
|
|
Total current
liabilities
|
|
541,724
|
|
|
587,712
|
|
|
|
|
|
|
Defined benefit
pension plans
|
|
153,558
|
|
|
145,659
|
|
Long-term
borrowings
|
|
95,342
|
|
|
95,842
|
|
Contract
liability
|
|
18,461
|
|
|
18,435
|
|
Deferred executive
compensation
|
|
11,983
|
|
|
13,734
|
|
Other long-term
liabilities
|
|
19,433
|
|
|
21,605
|
|
Total
liabilities
|
|
840,501
|
|
|
882,987
|
|
|
|
|
|
|
Shareholders'
equity
|
|
1,116,992
|
|
|
1,133,253
|
|
Total liabilities
and shareholders' equity
|
|
$
|
1,957,493
|
|
|
$
|
2,016,240
|
|
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SOURCE Erie Indemnity Company