ERIE, Pa., Oct. 29, 2020 /PRNewswire/ -- Erie Indemnity
Company (NASDAQ: ERIE) today
announced financial results for the quarter and nine months ending
September 30, 2020. Net income was $89.2 million, or $1.71 per diluted share, in the third quarter of
2020, compared to $94.2 million, or
$1.80 per diluted share, in the third
quarter of 2019. Net income was $230.5
million, or $4.41 per diluted
share, in the first nine months of 2020, compared to $257.2 million, or $4.92 per diluted share, in the first nine months
of 2019.
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The significant disruption to the economy and financial markets
resulting from the COVID-19 pandemic that began in the first
quarter of 2020 continues to evolve and the pandemic's ultimate
impact and duration remain highly uncertain at this time.
While the Exchange experienced declines in new business premium in
the second quarter of 2020 due to the pandemic, new business
premiums grew 10.4% in the third quarter of 2020 compared to the
same period in 2019. The financial markets substantially
recovered in the third quarter from the financial volatility
negatively impacting our portfolio in the first quarter of 2020,
improving our investment results in the third quarter.
3Q and Nine Months
2020
|
(in
thousands)
|
3Q'20
|
3Q'19
|
|
2020
|
2019
|
|
Operating
income
|
$
|
96,225
|
|
$
|
105,907
|
|
|
$
|
273,105
|
|
$
|
288,639
|
|
|
Investment
income
|
16,438
|
|
13,606
|
|
|
18,796
|
|
33,053
|
|
|
Interest and other
expense, net
|
967
|
|
11
|
|
|
1,596
|
|
637
|
|
|
Income before income
taxes
|
111,696
|
|
119,502
|
|
|
290,305
|
|
321,055
|
|
|
Income tax
expense
|
22,480
|
|
25,333
|
|
|
59,786
|
|
63,821
|
|
|
Net income
|
$
|
89,216
|
|
$
|
94,169
|
|
|
$
|
230,519
|
|
$
|
257,234
|
|
|
|
|
|
|
|
|
|
Operating income before taxes decreased $9.7 million, or 9.1 percent, in the third
quarter of 2020 compared to the third quarter of 2019.
- Management fee revenue - policy issuance and renewal services
increased $10.1 million, or 2.1
percent, in the third quarter of 2020 compared to the third quarter
of 2019.
- Management fee revenue - administrative services increased
$0.5 million, or 3.3 percent, in the
third quarter of 2020 compared to the third quarter of 2019.
- Cost of operations - policy issuance and renewal
services
-
- Commissions increased $6.2
million in the third quarter of 2020 compared to the third
quarter of 2019, primarily driven by direct and affiliated assumed
written premium growth.
- Non-commission expense increased $13.2
million in the third quarter of 2020 compared to the third
quarter of 2019. Underwriting and policy processing expense
increased $3.2 million primarily due
to increases in personnel costs and underwriting report costs.
Administrative and other costs increased $8.8 million primarily driven by higher incentive
plan award accruals due to the Exchange's lower combined ratio and
the change in the company stock price, which experienced an
increase in the third quarter of 2020 compared to a decrease in the
same period in 2019. Increased professional fees also contributed
to the increase in administrative and other costs compared to the
same period in 2019.
Income from investments before taxes totaled $16.4 million in the third quarter of 2020
compared to $13.6 million in the
third quarter of 2019. Net realized gains on investments were
$5.9 million in the third quarter of
2020 compared to $1.7 million in the
third quarter of 2019. Net investment income was $7.0 million in the third quarter of 2020
compared to $8.7 million in the third
quarter of 2019. Earnings from limited partnerships were
$3.6 million in the third quarter of
2020 compared to earnings of $3.3
million in the third quarter of 2019.
Nine
Months 2020 Highlights
|
Operating income before taxes decreased $15.5 million, or 5.4 percent, in the first nine
months of 2020 compared to the first nine months of 2019.
- Management fee revenue - policy issuance and renewal services
increased $26.2 million, or 1.9
percent, in the first nine months of 2020 compared to the first
nine months of 2019.
- Management fee revenue - administrative services increased
$1.9 million, or 4.5 percent, in the
first nine months of 2020 compared to the first nine months of
2019.
- Cost of operations - policy issuance and renewal
services
-
- Commissions increased $20.4
million in the first nine months of 2020 compared to the
first nine months of 2019, primarily driven by a 1.9% increase in
direct and affiliated assumed written premium growth and increases
in agent incentive compensation due to improved agent
profitability.
- Non-commission expense increased $21.9
million in the first nine months of 2020 compared to the
first nine months of 2019. Information technology costs increased
$6.4 million primarily due to
increases in hardware and software costs, personnel costs, and
professional fees. Underwriting and policy processing expense
increased $6.0 million primarily due
to increases in personnel costs and underwriting report costs.
Administrative and other costs increased $6.3 million primarily driven by increases in
personnel costs and professional fees. Increased personnel costs in
all categories included higher incentive plan award accruals due to
Exchange's lower combined ratio and higher vacation accruals as
employees took less vacation in the first nine months of 2020 as a
result of the COVID-19 pandemic.
Income from investments before taxes totaled $18.8 million in the first nine months of 2020
compared to $33.1 million in the
first nine months of 2019. Net investment income was
$22.8 million in the first nine
months of 2020 compared to $25.2
million in the first nine months of 2019. Net realized gains
on investments were $1.6 million in
the first nine months of 2020 compared to $5.5 million in the first nine months of
2019. Net impairment losses of $3.2
million in the first nine months of 2020 were driven by the
COVID-19 pandemic's impact on the financial markets. Losses
from limited partnerships were $2.4
million in the first nine months of 2020 compared to
earnings of $2.5 million in the first
nine months of 2019.
Webcast Information
Indemnity has scheduled a pre-recorded audio broadcast on the Web
for 10:00 AM ET on October 30, 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
September 30,
|
|
Nine months ended
September 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
(Unaudited)
|
|
(Unaudited)
|
Operating
revenue
|
|
|
|
|
|
|
|
|
Management fee revenue
- policy issuance and renewal services, net
|
|
$
|
484,551
|
|
|
$
|
474,427
|
|
|
$
|
1,412,096
|
|
|
$
|
1,385,923
|
|
Management fee revenue
- administrative services, net
|
|
14,910
|
|
|
14,430
|
|
|
44,494
|
|
|
42,576
|
|
Administrative
services reimbursement revenue
|
|
147,710
|
|
|
142,730
|
|
|
451,229
|
|
|
431,305
|
|
Service agreement
revenue
|
|
6,310
|
|
|
7,155
|
|
|
19,418
|
|
|
20,754
|
|
Total operating
revenue
|
|
653,481
|
|
|
638,742
|
|
|
1,927,237
|
|
|
1,880,558
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Cost of operations -
policy issuance and renewal services
|
|
409,546
|
|
|
390,105
|
|
|
1,202,903
|
|
|
1,160,614
|
|
Cost of operations -
administrative services
|
|
147,710
|
|
|
142,730
|
|
|
451,229
|
|
|
431,305
|
|
Total operating
expenses
|
|
557,256
|
|
|
532,835
|
|
|
1,654,132
|
|
|
1,591,919
|
|
Operating
income
|
|
96,225
|
|
|
105,907
|
|
|
273,105
|
|
|
288,639
|
|
|
|
|
|
|
|
|
|
|
Investment
income
|
|
|
|
|
|
|
|
|
Net investment
income
|
|
7,030
|
|
|
8,652
|
|
|
22,772
|
|
|
25,199
|
|
Net realized
investment gains
|
|
5,915
|
|
|
1,696
|
|
|
1,635
|
|
|
5,501
|
|
Net impairment losses
recognized in earnings
|
|
(122)
|
|
|
(31)
|
|
|
(3,192)
|
|
|
(193)
|
|
Equity in earnings
(losses) of limited partnerships
|
|
3,615
|
|
|
3,289
|
|
|
(2,419)
|
|
|
2,546
|
|
Total investment
income
|
|
16,438
|
|
|
13,606
|
|
|
18,796
|
|
|
33,053
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
3
|
|
|
111
|
|
|
8
|
|
|
832
|
|
Other (expense)
income
|
|
(964)
|
|
|
100
|
|
|
(1,588)
|
|
|
195
|
|
Income before income
taxes
|
|
111,696
|
|
|
119,502
|
|
|
290,305
|
|
|
321,055
|
|
Income tax
expense
|
|
22,480
|
|
|
25,333
|
|
|
59,786
|
|
|
63,821
|
|
Net
income
|
|
$
|
89,216
|
|
|
$
|
94,169
|
|
|
$
|
230,519
|
|
|
$
|
257,234
|
|
|
|
|
|
|
|
|
|
|
Net income per
share
|
|
|
|
|
|
|
|
|
Class A common
stock – basic
|
|
$
|
1.92
|
|
|
$
|
2.02
|
|
|
$
|
4.95
|
|
|
$
|
5.52
|
|
Class A common
stock – diluted
|
|
$
|
1.71
|
|
|
$
|
1.80
|
|
|
$
|
4.41
|
|
|
$
|
4.92
|
|
Class B common
stock – basic
|
|
$
|
287
|
|
|
$
|
303
|
|
|
$
|
742
|
|
|
$
|
829
|
|
Class B common
stock – diluted
|
|
$
|
287
|
|
|
$
|
303
|
|
|
$
|
742
|
|
|
$
|
828
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – Basic
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
46,189,030
|
|
|
46,189,006
|
|
|
46,188,544
|
|
|
46,188,767
|
|
Class B common
stock
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – Diluted
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
52,310,429
|
|
|
52,325,125
|
|
|
52,312,588
|
|
|
52,317,275
|
|
Class B common
stock
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
|
|
|
|
|
|
|
|
Dividends declared
per share
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
$
|
0.965
|
|
|
$
|
0.90
|
|
|
$
|
2.895
|
|
|
$
|
2.70
|
|
Class B common
stock
|
|
$
|
144.75
|
|
|
$
|
135.00
|
|
|
$
|
434.25
|
|
|
$
|
405.00
|
|
Erie Indemnity
Company
|
Statements of
Financial Position
|
(in
thousands)
|
|
|
|
September 30,
2020
|
|
December 31,
2019
|
|
|
(Unaudited)
|
|
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
216,355
|
|
|
$
|
336,739
|
|
Available-for-sale
securities
|
|
13,429
|
|
|
32,810
|
|
Equity
securities
|
|
0
|
|
|
2,381
|
|
Receivables from Erie
Insurance Exchange and affiliates, net
|
|
501,192
|
|
|
468,636
|
|
Prepaid expenses and
other current assets
|
|
52,008
|
|
|
44,943
|
|
Federal income taxes
recoverable
|
|
3,965
|
|
|
462
|
|
Accrued investment
income
|
|
5,973
|
|
|
5,433
|
|
Total current
assets
|
|
792,922
|
|
|
891,404
|
|
|
|
|
|
|
Available-for-sale
securities, net
|
|
894,625
|
|
|
697,891
|
|
Equity
securities
|
|
94,435
|
|
|
64,752
|
|
Limited partnership
investments
|
|
10,006
|
|
|
26,775
|
|
Fixed assets,
net
|
|
254,908
|
|
|
221,379
|
|
Agent loans,
net
|
|
58,339
|
|
|
60,978
|
|
Deferred income
taxes, net
|
|
21,618
|
|
|
17,186
|
|
Other
assets
|
|
32,489
|
|
|
35,875
|
|
Total
assets
|
|
$
|
2,159,342
|
|
|
$
|
2,016,240
|
|
|
|
|
|
|
Liabilities and
shareholders' equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Commissions
payable
|
|
$
|
275,594
|
|
|
$
|
262,963
|
|
Agent
bonuses
|
|
85,709
|
|
|
96,053
|
|
Accounts payable and
accrued liabilities
|
|
148,075
|
|
|
134,957
|
|
Dividends
payable
|
|
44,940
|
|
|
44,940
|
|
Contract
liability
|
|
37,420
|
|
|
35,938
|
|
Deferred executive
compensation
|
|
12,701
|
|
|
10,882
|
|
Current portion of
long-term borrowings
|
|
2,021
|
|
|
1,979
|
|
Total current
liabilities
|
|
606,460
|
|
|
587,712
|
|
|
|
|
|
|
Defined benefit
pension plans
|
|
169,358
|
|
|
145,659
|
|
Long-term
borrowings
|
|
94,337
|
|
|
95,842
|
|
Contract
liability
|
|
19,140
|
|
|
18,435
|
|
Deferred executive
compensation
|
|
11,335
|
|
|
13,734
|
|
Other long-term
liabilities
|
|
11,495
|
|
|
21,605
|
|
Total
liabilities
|
|
912,125
|
|
|
882,987
|
|
|
|
|
|
|
Shareholders'
equity
|
|
1,247,217
|
|
|
1,133,253
|
|
Total liabilities
and shareholders' equity
|
|
$
|
2,159,342
|
|
|
$
|
2,016,240
|
|
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SOURCE Erie Indemnity Company