ERIE, Pa., Oct. 28, 2021 /PRNewswire/ -- Erie Indemnity
Company (NASDAQ: ERIE) today
announced financial results for the quarter and nine months ending
September 30, 2021. Net income was $90.2 million, or $1.72 per diluted share, in the third quarter of
2021, compared to $89.2 million, or
$1.71 per diluted share, in the third
quarter of 2020. Net income was $242.8
million, or $4.64 per diluted
share, in the first nine months of 2021, compared to $230.5 million, or $4.41 per diluted share, in the first nine 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.
3Q and Nine Months
2021
|
(in
thousands)
|
3Q'21
|
3Q'20
|
|
2021
|
2020
|
|
Operating
income
|
$
|
95,103
|
|
$
|
96,225
|
|
|
$
|
256,263
|
|
$
|
273,105
|
|
|
Investment
income
|
20,598
|
|
16,438
|
|
|
55,004
|
|
18,796
|
|
|
Interest and other
expense, net
|
1,575
|
|
967
|
|
|
4,690
|
|
1,596
|
|
|
Income before income
taxes
|
114,126
|
|
111,696
|
|
|
306,577
|
|
290,305
|
|
|
Income tax
expense
|
23,903
|
|
22,480
|
|
|
63,759
|
|
59,786
|
|
|
Net income
|
$
|
90,223
|
|
$
|
89,216
|
|
|
$
|
242,818
|
|
$
|
230,519
|
|
|
|
|
|
|
|
|
|
Operating income before taxes decreased $1.1 million, or 1.2 percent, in the third
quarter of 2021 compared to the third quarter of 2020.
- Management fee revenue - policy issuance and renewal services
increased $20.3 million, or 4.2
percent, in the third quarter of 2021 compared to the third quarter
of 2020.
- Management fee revenue - administrative services decreased
$0.4 million, or 2.9 percent, in the
third quarter of 2021 compared to the third quarter of 2020.
- Cost of operations - policy issuance and renewal
services
-
- Commissions increased $14.9
million in the third quarter of 2021 compared to the third
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 third quarter of
2021 compared to the third quarter of 2020.
- Non-commission expense increased $5.9
million in the third quarter of 2021 compared to the third
quarter of 2020. Information technology costs increased
$3.8 million primarily due to
increased hardware and software costs as well as increased
personnel costs. Sales and advertising increased $1.3 million primarily due to personnel costs.
Administrative and other costs increased $0.5 million primarily driven by increased
building and equipment depreciation compared to the same period in
2020. Personnel costs in all expense categories for the third
quarter of 2021 were impacted by higher medical costs compared to
the prior year as the COVID-19 pandemic reduced elective procedures
in 2020 and higher incentive plan award accruals due to increase
direct written premium growth.
Income from investments before taxes totaled $20.6 million in the third quarter of 2021
compared to $16.4 million in the
third quarter of 2020. Net investment income was $18.9 million in the third quarter of 2021
compared to $10.6 million in the
third quarter of 2020. Included in net investment income is
$11.5 million of limited partnership
earnings in the third quarter of 2021 compared to $3.6 million in the third quarter of 2020.
Net realized gains on investments were $1.6
million in the third quarter of 2021 compared to
$5.9 million in the third quarter of
2020.
Nine Months 2021 Highlights
|
Operating income before taxes decreased $16.8 million, or 6.2 percent, in the first nine
months of 2021 compared to the first nine months of 2020.
- Management fee revenue - policy issuance and renewal services
increased $50.8 million, or 3.6
percent, in the first nine months of 2021 compared to the first
nine months of 2020.
- Management fee revenue - administrative services decreased
$0.5 million, or 1.1 percent, in the
first nine months of 2021 compared to the first nine months of
2020.
- Cost of operations - policy issuance and renewal
services
-
- Commissions increased $39.0
million in the first nine months of 2021 compared to the
first nine 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 nine
months 2021 compared to the first nine months of 2020. For the nine
months ended September 30, 2020,
lower claims frequency and related loss expense due to the COVID-19
pandemic impacted agent compensation related to the profitability
component.
- Non-commission expense increased $26.8
million for the nine months ended September 30, 2021 compared to the same period in
2020. Underwriting and policy processing expense increased
$2.6 million primarily due to
increased personnel costs and underwriting report costs.
Information technology costs increased $10.9
million primarily due to increased hardware and software
costs and personnel costs. Administrative and other costs increased
$12.6 million primarily driven by
increased building and equipment depreciation, professional fees
and personnel costs compared to the same period in 2020. Personnel
costs in all expense categories were impacted by higher medical
costs compared to the prior year as the COVID-19 pandemic reduced
elective procedures in 2020 and higher incentive plan award
accruals due to increase direct written premium growth.
Income from investments before taxes totaled $55.0 million in the first nine months of 2021
compared to $18.8 million in the
first nine months of 2020. Net investment income was
$49.6 million in the first nine
months of 2021 compared to $20.4
million in the first nine months of 2020. Included in
net investment income is $26.7
million of limited partnership earnings in the first nine
months of 2021 and $2.4 million of
limited partnership losses in the first nine months of 2020.
Net realized gains on investments were $5.2
million in the first nine months of 2021 compared to
$1.6 million in the first nine months
of 2020.
Webcast Information
Indemnity has scheduled a pre-recorded audio broadcast on the Web
for 10:00 AM ET on October 29, 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 are available on ERIE's website
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
September 30,
|
|
Nine months ended
September 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
(Unaudited)
|
|
(Unaudited)
|
Operating
revenue
|
|
|
|
|
|
|
|
|
|
Management fee revenue
- policy issuance and renewal services
|
|
$
|
504,891
|
|
|
$
|
484,551
|
|
|
$
|
1,462,880
|
|
|
$
|
1,412,096
|
|
Management fee revenue
- administrative services
|
|
14,471
|
|
|
14,910
|
|
|
43,985
|
|
|
44,494
|
|
Administrative
services reimbursement revenue
|
|
162,410
|
|
|
147,710
|
|
|
473,133
|
|
|
451,229
|
|
Service agreement
revenue
|
|
6,067
|
|
|
6,310
|
|
|
18,048
|
|
|
19,418
|
|
Total operating
revenue
|
|
687,839
|
|
|
653,481
|
|
|
1,998,046
|
|
|
1,927,237
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
Cost of operations -
policy issuance and renewal services
|
|
430,326
|
|
|
409,546
|
|
|
1,268,650
|
|
|
1,202,903
|
|
Cost of operations -
administrative services
|
|
162,410
|
|
|
147,710
|
|
|
473,133
|
|
|
451,229
|
|
Total operating
expenses
|
|
592,736
|
|
|
557,256
|
|
|
1,741,783
|
|
|
1,654,132
|
|
Operating
income
|
|
95,103
|
|
|
96,225
|
|
|
256,263
|
|
|
273,105
|
|
|
|
|
|
|
|
|
|
|
|
Investment
income
|
|
|
|
|
|
|
|
|
|
Net investment
income
|
|
18,858
|
|
|
10,645
|
|
|
49,605
|
|
|
20,353
|
|
Net realized
investment gains
|
|
1,610
|
|
|
5,915
|
|
|
5,183
|
|
|
1,635
|
|
Net impairment
recoveries (losses) recognized in earnings
|
|
130
|
|
|
(122)
|
|
|
216
|
|
|
(3,192)
|
|
Total investment
income
|
|
20,598
|
|
|
16,438
|
|
|
55,004
|
|
|
18,796
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
1,034
|
|
|
3
|
|
|
3,082
|
|
|
8
|
|
Other
expense
|
|
541
|
|
|
964
|
|
|
1,608
|
|
|
1,588
|
|
Income before income
taxes
|
|
114,126
|
|
|
111,696
|
|
|
306,577
|
|
|
290,305
|
|
Income tax
expense
|
|
23,903
|
|
|
22,480
|
|
|
63,759
|
|
|
59,786
|
|
Net
income
|
|
$
|
90,223
|
|
|
$
|
89,216
|
|
|
$
|
242,818
|
|
|
$
|
230,519
|
|
|
|
|
|
|
|
|
|
|
|
Net income per
share
|
|
|
|
|
|
|
|
|
|
Class A common
stock – basic
|
|
$
|
1.94
|
|
|
$
|
1.92
|
|
|
$
|
5.21
|
|
|
$
|
4.95
|
|
Class A common
stock – diluted
|
|
$
|
1.72
|
|
|
$
|
1.71
|
|
|
$
|
4.64
|
|
|
$
|
4.41
|
|
Class B common
stock – basic and diluted
|
|
$
|
291
|
|
|
$
|
287
|
|
|
$
|
782
|
|
|
$
|
742
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – Basic
|
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
46,189,035
|
|
|
46,189,030
|
|
|
46,188,729
|
|
|
46,188,544
|
|
Class B common
stock
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – Diluted
|
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
52,305,245
|
|
|
52,310,429
|
|
|
52,307,859
|
|
|
52,312,588
|
|
Class B common
stock
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared
per share
|
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
$
|
1.035
|
|
|
$
|
0.965
|
|
|
$
|
3.105
|
|
|
$
|
2.895
|
|
Class B common
stock
|
|
$
|
155.25
|
|
|
$
|
144.75
|
|
|
$
|
465.75
|
|
|
$
|
434.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Erie Indemnity
Company
|
Statements of
Financial Position
|
(in
thousands)
|
|
|
|
September 30,
2021
|
|
December 31,
2020
|
|
|
(Unaudited)
|
|
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
235,996
|
|
|
$
|
161,240
|
|
Available-for-sale
securities
|
|
30,627
|
|
|
17,697
|
|
Equity
securities
|
|
10
|
|
|
19
|
|
Receivables from Erie
Insurance Exchange and affiliates, net
|
|
503,413
|
|
|
494,637
|
|
Prepaid expenses and
other current assets
|
|
55,003
|
|
|
52,561
|
|
Accrued investment
income
|
|
6,104
|
|
|
6,146
|
|
Total current
assets
|
|
831,153
|
|
|
732,300
|
|
|
|
|
|
|
Available-for-sale
securities, net
|
|
906,877
|
|
|
910,539
|
|
Equity
securities
|
|
86,270
|
|
|
94,071
|
|
Fixed assets,
net
|
|
277,939
|
|
|
265,341
|
|
Agent loans,
net
|
|
59,462
|
|
|
62,449
|
|
Deferred income
taxes, net
|
|
17,153
|
|
|
12,341
|
|
Other
assets
|
|
57,704
|
|
|
40,081
|
|
Total
assets
|
|
$
|
2,236,558
|
|
|
$
|
2,117,122
|
|
|
|
|
|
|
Liabilities and
shareholders' equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Commissions
payable
|
|
$
|
280,540
|
|
|
$
|
262,338
|
|
Agent
bonuses
|
|
88,556
|
|
|
110,158
|
|
Accounts payable and
accrued liabilities
|
|
148,282
|
|
|
150,706
|
|
Dividends
payable
|
|
48,200
|
|
|
48,200
|
|
Contract
liability
|
|
35,853
|
|
|
36,917
|
|
Deferred executive
compensation
|
|
10,757
|
|
|
17,319
|
|
Current portion of
long-term borrowings
|
|
2,075
|
|
|
2,031
|
|
Total current
liabilities
|
|
614,263
|
|
|
627,669
|
|
|
|
|
|
|
Defined benefit
pension plans
|
|
192,808
|
|
|
164,346
|
|
Long-term
borrowings
|
|
92,273
|
|
|
93,833
|
|
Contract
liability
|
|
18,098
|
|
|
18,878
|
|
Deferred executive
compensation
|
|
14,477
|
|
|
14,904
|
|
Other long-term
liabilities
|
|
17,783
|
|
|
9,444
|
|
Total
liabilities
|
|
949,702
|
|
|
929,074
|
|
|
|
|
|
|
Shareholders'
equity
|
|
1,286,856
|
|
|
1,188,048
|
|
Total liabilities
and shareholders' equity
|
|
$
|
2,236,558
|
|
|
$
|
2,117,122
|
|
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SOURCE Erie Indemnity Company