ERIE, Pa., Feb. 25, 2021 /PRNewswire/ -- Erie Indemnity
Company (NASDAQ: ERIE) today
announced financial results for the full year and quarter ending
December 31, 2020. Net income was $293.3 million, or $5.61 per diluted share, in 2020, compared to
$316.8 million, or $6.06 per diluted share, in 2019. Net
income was $62.8 million, or
$1.20 per diluted share, in the
fourth quarter of 2020, compared to $59.6
million, or $1.14 per diluted
share, in the fourth quarter 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.
Although the Exchange experienced declines in new business premiums
in the first half of 2020 due to business disruptions and
recessionary conditions, new business premiums grew 10.8% in the
second half of 2020 compared to the same period in 2019. The
financial markets substantially recovered during the remainder of
2020 from the volatility impacting our portfolio in the first
quarter of 2020, resulting in overall realized and unrealized
gains.
4Q and Full Year
2020
|
(dollars in
thousands)
|
4Q'20
|
4Q'19
|
|
2020
|
2019
|
|
Operating
income
|
$
|
65,052
|
|
$
|
68,700
|
|
|
$
|
338,157
|
|
$
|
357,339
|
|
|
Investment
income
|
14,071
|
|
6,914
|
|
|
32,867
|
|
39,967
|
|
|
Interest expense and
other (income), net
|
913
|
|
(36)
|
|
|
2,509
|
|
601
|
|
|
Income before income
taxes
|
78,210
|
|
75,650
|
|
|
368,515
|
|
396,705
|
|
|
Income tax
expense
|
15,425
|
|
16,063
|
|
|
75,211
|
|
79,884
|
|
|
Net income
|
$
|
62,785
|
|
$
|
59,587
|
|
|
$
|
293,304
|
|
$
|
316,821
|
|
|
|
|
|
|
|
|
|
2020 Full Year Highlights
|
Operating income before taxes decreased $19.2 million, or 5.4 percent, in 2020 compared
to 2019.
- Management fee revenue - policy issuance and renewal services
increased $31.3 million, or 1.7
percent, in 2020 compared to 2019.
- Management fee revenue allocated to administrative services
increased $2.3 million, or 4.0
percent, in 2020 compared to 2019.
- Cost of operations - policy issuance and renewal
services
-
- Commissions increased $26.6
million in 2020 compared to 2019 resulting from higher
direct and affiliated assumed premiums written by the Exchange and
higher agent incentive compensation. The Exchange experienced
a significant decrease in automobile claims frequency and related
loss expense beginning in March 2020
that continued through May 2020
driven by the COVID-19 pandemic, which contributed to an increase
in the profitability component of the agent incentive bonuses.
- Non-commission expense increased $24.3
million in 2020 compared to 2019. Underwriting and
policy processing costs increased $5.7
million primarily due to increased personnel costs and
underwriting report costs. Information technology costs
increased $6.2 million primarily due
to increased personnel costs and hardware and software costs.
Administrative and other expenses increased $9.3 million primarily driven by increased
personnel costs. Increased personnel costs in all categories
included higher incentive plan award accruals related to
underwriting performance in 2020 compared to targets and higher
vacation accruals as employees took less vacation in 2020 as a
result of the COVID-19 pandemic.
- The administrative services reimbursement revenue and
corresponding cost of operations increased both total operating
revenue and total operating expenses by $609.4 million in 2020 and $582.0 million in 2019, but had no net impact on
operating income.
Income from investments before taxes totaled $32.9 million in 2020 compared to $40.0 million in 2019. Net realized gains
on investments were $6.4 million in
2020 compared to $6.1 million in
2019. Net investment income was $29.8
million in 2020 compared to $34.1
million in 2019.
Operating income before taxes decreased $3.6 million, or 5.3 percent, in the fourth
quarter of 2020 compared to the fourth quarter of 2019.
- Management fee revenue - policy issuance and renewal services
increased $5.2 million, or 1.2
percent, in the fourth quarter of 2020 compared to the fourth
quarter of 2019.
- Management fee revenue allocated to administrative services
increased $0.3 million, or 2.3
percent in the fourth quarter of 2020 compared to the fourth
quarter of 2019.
- Cost of operations - policy issuance and renewal
services
-
- Commissions increased $6.2
million in the fourth quarter of 2020 compared to the fourth
quarter of 2019 primarily driven by direct and affiliated assumed
written premium growth.
- Non-commission expense increased $2.5
million in the fourth quarter of 2020 compared to the fourth
quarter of 2019. Administrative and other expenses increased
$2.9 million primarily driven by an
increase in long-term incentive plan costs due to an increase in
the company stock price in the fourth quarter of 2020 compared to a
decrease in the company stock price in the fourth quarter of 2019
and increased personnel costs.
- The administrative services reimbursement revenue and
corresponding cost of operations increased both total operating
revenue and total operating expenses by $158.2 million and $150.7
million in the fourth quarter of 2020 and 2019,
respectively, but had no net impact on operating income.
Income from investments before taxes totaled $14.1 million in the fourth quarter of 2020
compared to $6.9 million in the
fourth quarter of 2019. Net realized gains on investments
were $4.8 million in the fourth
quarter of 2020 compared to $0.6
million in the fourth quarter of 2019. Net investment
income was $9.4 million in the fourth
quarter of 2020 compared to $6.3
million in the fourth quarter of 2019. Included in net
investment income is $1.8 million of
limited partnership earnings in the fourth quarter of 2020 and
$1.9 million in limited partnership
losses in the fourth quarter of 2019.
Webcast Information
Indemnity has scheduled a pre-recorded audio broadcast on the
Web for 10:00 AM ET on February 26, 2021.
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:
- dependence upon our relationship with the Erie Insurance
Exchange ("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;
- litigation and regulatory actions;
- emerging claims and coverage issues in the industry; and
- severe weather conditions or other catastrophic losses,
including terrorism;
- potential impacts of the COVID-19 pandemic on the growth and
financial condition of the Exchange;
- 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;
- outcome of pending and potential litigation;
- 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;
- factors affecting the quality and liquidity of our investment
portfolio; and
- our ability to meet liquidity needs and access capital.
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
December 31,
|
|
Twelve months
ended
December 31,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(Unaudited)
|
|
|
|
|
Operating
revenue
|
|
|
|
|
|
|
|
Management fee revenue
- policy issuance and renewal services, net
|
$
|
429,698
|
|
|
$
|
424,534
|
|
|
$
|
1,841,794
|
|
|
$
|
1,810,457
|
|
Management fee revenue
- administrative services, net
|
14,969
|
|
|
14,628
|
|
|
59,463
|
|
|
57,204
|
|
Administrative
services reimbursement revenue
|
158,206
|
|
|
150,705
|
|
|
609,435
|
|
|
582,010
|
|
Service agreement
revenue
|
6,379
|
|
|
6,873
|
|
|
25,797
|
|
|
27,627
|
|
Total operating
revenue
|
609,252
|
|
|
596,740
|
|
|
2,536,489
|
|
|
2,477,298
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
Cost of operations -
policy issuance and renewal services
|
385,994
|
|
|
377,335
|
|
|
1,588,897
|
|
|
1,537,949
|
|
Cost of operations -
administrative services
|
158,206
|
|
|
150,705
|
|
|
609,435
|
|
|
582,010
|
|
Total operating
expenses
|
544,200
|
|
|
528,040
|
|
|
2,198,332
|
|
|
2,119,959
|
|
Operating
income
|
65,052
|
|
|
68,700
|
|
|
338,157
|
|
|
357,339
|
|
|
|
|
|
|
|
|
|
Investment
income
|
|
|
|
|
|
|
|
Net investment
income
|
9,400
|
|
|
6,314
|
|
|
29,753
|
|
|
34,059
|
|
Net realized
investment gains
|
4,757
|
|
|
602
|
|
|
6,392
|
|
|
6,103
|
|
Net impairment losses
recognized in earnings
|
(86)
|
|
|
(2)
|
|
|
(3,278)
|
|
|
(195)
|
|
Total investment
income
|
14,071
|
|
|
6,914
|
|
|
32,867
|
|
|
39,967
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
723
|
|
|
24
|
|
|
731
|
|
|
856
|
|
Other (expense)
income
|
(190)
|
|
|
60
|
|
|
(1,778)
|
|
|
255
|
|
Income before income
taxes
|
78,210
|
|
|
75,650
|
|
|
368,515
|
|
|
396,705
|
|
Income tax
expense
|
15,425
|
|
|
16,063
|
|
|
75,211
|
|
|
79,884
|
|
Net
income
|
$
|
62,785
|
|
|
$
|
59,587
|
|
|
$
|
293,304
|
|
|
$
|
316,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per
Share
|
|
|
|
|
|
|
|
Net income per
share
|
|
|
|
|
|
|
|
Class A common
stock – basic
|
$
|
1.35
|
|
|
$
|
1.28
|
|
|
$
|
6.30
|
|
|
$
|
6.80
|
|
Class A common
stock – diluted
|
$
|
1.20
|
|
|
$
|
1.14
|
|
|
$
|
5.61
|
|
|
$
|
6.06
|
|
Class B common
stock – basic and diluted
|
$
|
202
|
|
|
$
|
192
|
|
|
$
|
945
|
|
|
$
|
1,020
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – Basic
|
|
|
|
|
|
|
|
Class A common
stock
|
49,189,001
|
|
|
46,189,033
|
|
|
46,188,659
|
|
|
46,188,836
|
|
Class B common
stock
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – Diluted
|
|
|
|
|
|
|
|
Class A common
stock
|
52,315,670
|
|
|
52,327,607
|
|
|
52,313,360
|
|
|
52,319,860
|
|
Class B common
stock
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
|
|
|
|
|
|
|
Dividends declared
per share
|
|
|
|
|
|
|
|
Class A common
stock
|
$
|
3.035
|
|
|
$
|
0.965
|
|
|
$
|
5.930
|
|
|
$
|
3.665
|
|
Class B common
stock
|
$
|
455.25
|
|
|
$
|
144.75
|
|
|
$
|
889.50
|
|
|
$
|
549.75
|
|
|
|
|
Erie Indemnity
Company
|
Statements of
Financial Position
|
(in
thousands)
|
|
|
December 31,
2020
|
|
December 31,
2019
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
161,240
|
|
|
$
|
336,739
|
|
Available-for-sale
securities
|
17,697
|
|
|
32,810
|
|
Equity
securities
|
19
|
|
|
2,381
|
|
Receivables from Erie
Insurance Exchange and affiliates, net
|
494,637
|
|
|
468,636
|
|
Prepaid expenses and
other current assets
|
49,897
|
|
|
44,943
|
|
Federal income taxes
recoverable
|
2,664
|
|
|
462
|
|
Accrued investment
income
|
6,146
|
|
|
5,433
|
|
Total current
assets
|
732,300
|
|
|
891,404
|
|
|
|
|
|
Available-for-sale
securities, net
|
910,539
|
|
|
697,891
|
|
Equity
securities
|
94,071
|
|
|
64,752
|
|
Fixed assets,
net
|
265,341
|
|
|
221,379
|
|
Agent loans,
net
|
62,449
|
|
|
60,978
|
|
Deferred income
taxes, net
|
12,341
|
|
|
17,186
|
|
Other
assets
|
40,081
|
|
|
62,650
|
|
Total
assets
|
$
|
2,117,122
|
|
|
$
|
2,016,240
|
|
|
|
|
|
Liabilities and
shareholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Commissions
payable
|
$
|
262,338
|
|
|
$
|
262,963
|
|
Agent
bonuses
|
110,158
|
|
|
96,053
|
|
Accounts payable and
accrued liabilities
|
150,706
|
|
|
134,957
|
|
Dividends
payable
|
48,200
|
|
|
44,940
|
|
Contract
liability
|
36,917
|
|
|
35,938
|
|
Deferred executive
compensation
|
17,319
|
|
|
10,882
|
|
Current portion of
long-term borrowings
|
2,031
|
|
|
1,979
|
|
Total current
liabilities
|
627,669
|
|
|
587,712
|
|
|
|
|
|
Defined benefit
pension plan
|
164,346
|
|
|
145,659
|
|
Long-term
borrowings
|
93,833
|
|
|
95,842
|
|
Contract
liability
|
18,878
|
|
|
18,435
|
|
Deferred executive
compensation
|
14,904
|
|
|
13,734
|
|
Other long-term
liabilities
|
9,444
|
|
|
21,605
|
|
Total
liabilities
|
929,074
|
|
|
882,987
|
|
|
|
|
|
Shareholders'
equity
|
1,188,048
|
|
|
1,133,253
|
|
Total liabilities
and shareholders' equity
|
$
|
2,117,122
|
|
|
$
|
2,016,240
|
|
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SOURCE Erie Indemnity Company