ERIE, Pa., July 29, 2021 /PRNewswire/ -- Erie Indemnity
Company (NASDAQ: ERIE) today
announced financial results for the quarter and six months ending
June 30, 2021. Net income was $79.0 million, or $1.51 per diluted share, in the second quarter of
2021, compared to $82.0 million, or
$1.57 per diluted share, in the
second quarter of 2020. Net income was $152.6 million, or $2.92 per diluted share, in the first six months
of 2021, compared to $141.3 million,
or $2.70 per diluted share, in the
first six months of 2020.
The uncertainty resulting from the COVID-19 pandemic continues
to evolve and the pandemic's ultimate impact and duration remain
uncertain at this time.
2Q and First Half
2021
|
(in
thousands)
|
2Q'21
|
2Q'20
|
|
1H21
|
1H20
|
|
Operating
income
|
$
|
85,065
|
|
$
|
91,189
|
|
|
$
|
161,160
|
|
$
|
176,880
|
|
|
Investment
income
|
16,418
|
|
11,553
|
|
|
34,406
|
|
2,358
|
|
|
Interest and other
expense, net
|
1,587
|
|
260
|
|
|
3,115
|
|
629
|
|
|
Income before income
taxes
|
99,896
|
|
102,482
|
|
|
192,451
|
|
178,609
|
|
|
Income tax
expense
|
20,867
|
|
20,505
|
|
|
39,856
|
|
37,306
|
|
|
Net income
|
$
|
79,029
|
|
$
|
81,977
|
|
|
$
|
152,595
|
|
$
|
141,303
|
|
|
|
|
|
|
|
|
|
Operating income before taxes decreased $6.1 million, or 6.7 percent, in the second
quarter of 2021 compared to the second quarter of 2020.
- Management fee revenue - policy issuance and renewal services
increased $18.5 million, or 3.8
percent, in the second quarter of 2021 compared to the second
quarter of 2020.
- Management fee revenue - administrative services decreased
$0.1 million, or 1.0 percent, in the
second quarter of 2021 compared to the second quarter of 2020.
- Cost of operations - policy issuance and renewal
services
-
- Commissions increased $14.7
million in the second quarter of 2021 compared to the second
quarter of 2020, driven by the growth in direct and affiliated
assumed written premium, primarily in lines of business that pay a
higher commission rate. To a lesser extent, there was also an
increase in agent incentive compensation for the second quarter of
2021 compared to the second quarter of 2020.
- Non-commission expense increased $9.2
million in the second quarter of 2021 compared to the second
quarter of 2020. Underwriting and policy processing expense
increased $3.3 million primarily due
to increased personnel costs and underwriting report costs.
Information technology costs increased $2.9
million primarily due to increased hardware and software
costs as well as increased personnel costs. Administrative and
other costs increased $3.6 million
primarily driven by increased building and equipment depreciation
and professional fees in the second quarter of 2021 compared to the
same period in 2020. Personnel costs in all expense categories for
the second quarter of 2021 were impacted by higher medical costs
compared to the prior year as the COVID-19 pandemic reduced
elective procedures in 2020.
Income from investments before taxes totaled $16.4 million in the second quarter of 2021
compared to $11.6 million in the
second quarter of 2020. Net investment income was
$13.7 million in the second quarter
of 2021 compared to $5.0 million in
the second quarter of 2020. Included in net investment income
is $6.2 million of limited
partnership earnings in the second quarter of 2021 and $2.3 million of limited partnership losses in the
second quarter of 2020. Net realized gains on investments
were $2.8 million in the second
quarter of 2021 compared to $6.5
million in the second quarter of 2020.
First
Half 2021
Highlights
|
Operating income before taxes decreased $15.7 million, or 8.9 percent, in the first six
months of 2021 compared to the first six months of 2020.
- Management fee revenue - policy issuance and renewal services
increased $30.4 million, or 3.3
percent, in the first six months of 2021 compared to the first six
months of 2020.
- Management fee revenue - administrative services decreased
$0.1 million, or 0.2 percent, in the
first six months of 2021 compared to the first six months of
2020.
- Cost of operations - policy issuance and renewal
services
-
- Commissions increased $24.1
million in the first six months of 2021 compared to the
first six months of 2020, driven by the growth in direct and
affiliated assumed written premium, primarily in lines of business
that pay a higher commission rate. To a lesser extent, there was
also an increase in agent incentive compensation for the first six
months 2021 compared to the first six months of 2020.
- Non-commission expense increased $20.8
million for the six months ended June
30, 2021 compared to the same period in 2020. Underwriting
and policy processing costs increased $2.5
million primarily due to increased underwriting report costs
and personnel costs. Information technology costs increased
$7.2 million primarily due to
increased hardware and software costs and personnel costs.
Administrative and other costs increased $12.1 million primarily driven by increased
personnel costs and professional fees compared to the same period
in 2020. Personnel costs in all expense categories were impacted by
higher pension costs and higher medical costs compared to the prior
year as the COVID-19 pandemic reduced elective procedures in
2020.
Income from investments before taxes totaled $34.4 million in the first six months of 2021
compared to $2.4 million in the first
six months of 2020. Net investment income was $30.7 million in the first six months of 2021
compared to $9.7 million in the first
six months of 2020. Included in net investment income is
$15.2 million of limited partnership
earnings in the first six months of 2021 and $6.0 million of limited partnership losses in the
first six months of 2020. Net realized gains on investments
were $3.6 million in the first six
months of 2021 compared to net realized losses of $4.3 million in the first six months of 2020.
Webcast Information
Indemnity has scheduled a
pre-recorded audio broadcast on the Web for 10:00 AM
ET on July 30, 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
12th largest homeowners insurer, 13th
largest automobile insurer and 13th largest commercial lines
insurer in the United States based on direct premiums
written. Founded in 1925, Erie Insurance is a Fortune 500
company and the 16th largest property/casualty insurer in
the United States based on total
lines net premium written. Rated A+ (Superior) by A.M.
Best, ERIE has more than 6 million
policies in force and operates in 12 states and the District
of Columbia.
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; an
- 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
June 30,
|
|
Six months ended June
30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
(Unaudited)
|
|
(Unaudited)
|
Operating
revenue
|
|
|
|
|
|
|
|
|
Management fee revenue
- policy issuance and renewal services
|
|
$
|
502,271
|
|
|
$
|
483,795
|
|
|
$
|
957,989
|
|
|
$
|
927,545
|
|
Management fee revenue
- administrative services
|
|
14,667
|
|
|
14,813
|
|
|
29,514
|
|
|
29,584
|
|
Administrative
services reimbursement revenue
|
|
157,190
|
|
|
151,965
|
|
|
310,723
|
|
|
303,519
|
|
Service agreement
revenue
|
|
5,902
|
|
|
6,446
|
|
|
11,981
|
|
|
13,108
|
|
Total operating
revenue
|
|
680,030
|
|
|
657,019
|
|
|
1,310,207
|
|
|
1,273,756
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Cost of operations -
policy issuance and renewal services
|
|
437,775
|
|
|
413,865
|
|
|
838,324
|
|
|
793,357
|
|
Cost of operations -
administrative services
|
|
157,190
|
|
|
151,965
|
|
|
310,723
|
|
|
303,519
|
|
Total operating
expenses
|
|
594,965
|
|
|
565,830
|
|
|
1,149,047
|
|
|
1,096,876
|
|
Operating
income
|
|
85,065
|
|
|
91,189
|
|
|
161,160
|
|
|
176,880
|
|
|
|
|
|
|
|
|
|
|
Investment
income
|
|
|
|
|
|
|
|
|
Net investment
income
|
|
13,650
|
|
|
5,044
|
|
|
30,747
|
|
|
9,708
|
|
Net realized
investment gains (losses)
|
|
2,769
|
|
|
6,526
|
|
|
3,573
|
|
|
(4,280)
|
|
Net impairment
(losses) recoveries recognized in earnings
|
|
(1)
|
|
|
(17)
|
|
|
86
|
|
|
(3,070)
|
|
Total investment
income
|
|
16,418
|
|
|
11,553
|
|
|
34,406
|
|
|
2,358
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
1,039
|
|
|
2
|
|
|
2,048
|
|
|
5
|
|
Other
expense
|
|
548
|
|
|
258
|
|
|
1,067
|
|
|
624
|
|
Income before income
taxes
|
|
99,896
|
|
|
102,482
|
|
|
192,451
|
|
|
178,609
|
|
Income tax
expense
|
|
20,867
|
|
|
20,505
|
|
|
39,856
|
|
|
37,306
|
|
Net
income
|
|
$
|
79,029
|
|
|
$
|
81,977
|
|
|
$
|
152,595
|
|
|
$
|
141,303
|
|
|
|
|
|
|
|
|
|
|
Net income per
share
|
|
|
|
|
|
|
|
|
Class A common
stock – basic
|
|
$
|
1.70
|
|
|
$
|
1.76
|
|
|
$
|
3.28
|
|
|
$
|
3.03
|
|
Class A common
stock – diluted
|
|
$
|
1.51
|
|
|
$
|
1.57
|
|
|
$
|
2.92
|
|
|
$
|
2.70
|
|
Class B common
stock – basic and diluted
|
|
$
|
255
|
|
|
$
|
264
|
|
|
$
|
491
|
|
|
$
|
455
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – Basic
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
46,188,289
|
|
|
46,187,808
|
|
|
46,188,573
|
|
|
46,188,299
|
|
Class B common
stock
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – Diluted
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
52,302,370
|
|
|
52,302,981
|
|
|
52,309,163
|
|
|
52,313,667
|
|
Class B common
stock
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
|
|
|
|
|
|
|
|
Dividends declared
per share
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
$
|
1.035
|
|
|
$
|
0.965
|
|
|
$
|
2.070
|
|
|
$
|
1.930
|
|
Class B common
stock
|
|
$
|
155.25
|
|
|
$
|
144.75
|
|
|
$
|
310.50
|
|
|
$
|
289.50
|
|
Erie Indemnity
Company
|
Statements of
Financial Position
|
(in
thousands)
|
|
|
|
June 30,
2021
|
|
December 31,
2020
|
|
|
(Unaudited)
|
|
|
Assets
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
156,038
|
|
|
$
|
161,240
|
|
Available-for-sale
securities
|
|
20,856
|
|
|
17,697
|
|
Equity
securities
|
|
207
|
|
|
19
|
|
Receivables from Erie
Insurance Exchange and affiliates, net
|
|
504,013
|
|
|
494,637
|
|
Prepaid expenses and
other current assets
|
|
59,574
|
|
|
52,561
|
|
Accrued investment
income
|
|
6,121
|
|
|
6,146
|
|
Total current
assets
|
|
746,809
|
|
|
732,300
|
|
|
|
|
|
|
Available-for-sale
securities, net
|
|
915,942
|
|
|
910,539
|
|
Equity
securities
|
|
93,798
|
|
|
94,071
|
|
Fixed assets,
net
|
|
280,402
|
|
|
265,341
|
|
Agent loans,
net
|
|
60,070
|
|
|
62,449
|
|
Deferred income
taxes, net
|
|
17,971
|
|
|
12,341
|
|
Other
assets
|
|
48,652
|
|
|
40,081
|
|
Total
assets
|
|
$
|
2,163,644
|
|
|
$
|
2,117,122
|
|
|
|
|
|
|
Liabilities and
shareholders' equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Commissions
payable
|
|
$
|
284,234
|
|
|
$
|
262,338
|
|
Agent
bonuses
|
|
62,694
|
|
|
110,158
|
|
Accounts payable and
accrued liabilities
|
|
150,346
|
|
|
150,706
|
|
Dividends
payable
|
|
48,200
|
|
|
48,200
|
|
Contract
liability
|
|
35,742
|
|
|
36,917
|
|
Deferred executive
compensation
|
|
8,581
|
|
|
17,319
|
|
Current portion of
long-term borrowings
|
|
2,064
|
|
|
2,031
|
|
Total current
liabilities
|
|
591,861
|
|
|
627,669
|
|
|
|
|
|
|
Defined benefit
pension plans
|
|
184,111
|
|
|
164,346
|
|
Long-term
borrowings
|
|
92,795
|
|
|
93,833
|
|
Contract
liability
|
|
18,135
|
|
|
18,878
|
|
Deferred executive
compensation
|
|
13,773
|
|
|
14,904
|
|
Other long-term
liabilities
|
|
17,867
|
|
|
9,444
|
|
Total
liabilities
|
|
918,542
|
|
|
929,074
|
|
|
|
|
|
|
Shareholders'
equity
|
|
1,245,102
|
|
|
1,188,048
|
|
Total liabilities
and shareholders' equity
|
|
$
|
2,163,644
|
|
|
$
|
2,117,122
|
|
|
|
|
|
|
|
|
|
|
|
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SOURCE Erie Indemnity Company