Net Income per Diluted Share was $2.25 for the Quarter and $3.90 for the Six Months of 2023
ERIE, Pa., July 27, 2023 Erie Indemnity Company
(NASDAQ: ERIE) today announced
financial results for the quarter and six months ending
June 30, 2023. Net income was $117.9 million, or $2.25 per diluted share, in the second quarter of
2023, compared to $80.1 million, or
$1.53 per diluted share, in the
second quarter of 2022. Net income was $204.1 million, or $3.90 per diluted share, in the first six months
of 2023, compared to $148.8 million,
or $2.84 per diluted share, in the
first six months of 2022.
2Q and First Half
2023
|
(in
thousands)
|
2Q'23
|
2Q'22
|
|
1H'23
|
1H'22
|
Operating
income
|
$ 134,158
|
$ 104,000
|
|
$
244,701
|
$
188,312
|
Investment income
(loss)
|
11,627
|
(2,094)
|
|
6,895
|
915
|
Interest expense and
other (income), net
|
(3,305)
|
558
|
|
(6,642)
|
1,084
|
Income before income
taxes
|
149,090
|
101,348
|
|
258,238
|
188,143
|
Income tax
expense
|
31,238
|
21,201
|
|
54,145
|
39,377
|
Net income
|
$ 117,852
|
$
80,147
|
|
$
204,093
|
$
148,766
|
|
|
|
|
|
|
Operating income before taxes increased $30.2 million, or 29.0 percent, in the second
quarter of 2023 compared to the second quarter of 2022.
- Management fee revenue - policy issuance and renewal services
increased $88.8 million, or 16.3
percent, in the second quarter of 2023 compared to the second
quarter of 2022.
- Management fee revenue - administrative services increased
$1.2 million, or 8.0 percent, in the
second quarter of 2023 compared to the second quarter of 2022.
- Cost of operations - policy issuance and renewal
services
-
- Commissions increased $43.7
million in the second quarter of 2023 compared to the second
quarter of 2022, primarily driven by the growth in direct and
affiliated assumed written premium, partially offset by a decrease
in agent incentive compensation.
- Non-commission expense increased $16.1
million in the second quarter of 2023 compared to the second
quarter of 2022. Underwriting and policy processing expense
increased $3.7 million primarily due
to increased personnel and postage costs. Information
technology costs increased $3.3
million primarily due to increased personnel costs and
professional fees. Sales and advertising expense increased
$1.8 million primarily due to
increased agent related costs. Administrative and other costs
increased $7.7 million primarily due
to an increase in personnel costs, partially offset by a decrease
in professional fees. Personnel costs were impacted by
increased compensation including higher estimated costs for
incentive plan awards due to increased direct written premium and
policies in force growth, partially offset by lower pension costs
due to an increase in the discount rate compared to 2022.
Income from investments before taxes totaled $11.6 million in the second quarter of 2023
compared to loss from investments before taxes of $2.1 million in the second quarter of 2022.
Net investment income was $13.5
million in the second quarter of 2023 compared to
$8.3 million in the second quarter of
2022. Net investment income included less than $0.1 million of limited partnership earnings in
the second quarter of 2023 compared to losses of $0.3 million in the second quarter of 2022.
Net realized and unrealized losses on investments were $1.7 million in the second quarter of 2023
compared to $10.3 million in the
second quarter of 2022.
First Half 2023
Highlights
|
Operating income before taxes increased $56.4 million, or 29.9 percent, in the first six
months of 2023 compared to the first six months of 2022.
- Management fee revenue - policy issuance and renewal services
increased $158.9 million, or 15.4
percent, in the first six months of 2023 compared to the first six
months of 2022.
- Management fee revenue - administrative services increased
$2.0 million, or 7.1 percent, in the
first six months of 2023 compared to the first six months of
2022.
- Cost of operations - policy issuance and renewal
services
-
- Commissions increased $71.3
million in the first six months of 2023 compared to the
first six months of 2022, primarily driven by the growth in direct
and affiliated assumed written premium, partially offset by a
decrease in agent incentive compensation.
- Non-commission expense increased $33.1
million in the six months ended June
30, 2023 compared to the first six months of 2022.
Underwriting and policy processing expense increased $6.4 million primarily due to increased personnel
and postage costs. Information technology costs increased
$14.8 million primarily due to
increased professional fees, personnel costs, and hardware and
software costs. Sales and advertising expense increased
$1.9 million primarily due to
increased personnel and agent related costs. Administrative
and other costs increased $10.6
million primarily due to an increase in personnel costs,
partially offset by a decrease in professional fees.
Personnel costs were impacted by increased compensation including
higher estimated costs for incentive plan awards due to increased
direct written premium and policies in force growth, partially
offset by lower pension costs due to an increase in the discount
rate compared to 2022.
Income from investments before taxes totaled $6.9 million in the first six months of 2023
compared to $0.9 million in the first
six months of 2022. Net investment income was $15.7 million in the first six months of 2023
compared to $18.8 million in the
first six months of 2022. Net investment income included
$10.7 million of limited partnership
losses in the first six months of 2023 compared to earnings of
$2.5 million in the first six months
of 2022. Net realized and unrealized losses on investments
were $7.0 million in the first six
months of 2023 compared to $17.6
million in the first six months of 2022.
Webcast Information
Indemnity has scheduled a pre-recorded audio broadcast on the
Web for 10:00 AM ET on July 28, 2023.
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,
12th 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
19th 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;
- 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;
- emergence of significant unexpected events, including pandemics
and inflation;
- 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;
- outcome of pending and potential litigation;
- 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,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
(Unaudited)
|
|
(Unaudited)
|
Operating
revenue
|
|
|
|
|
|
|
|
|
Management fee revenue
- policy issuance and renewal services
|
|
$
633,339
|
|
$
544,555
|
|
$
1,191,429
|
|
$ 1,032,547
|
Management fee revenue
- administrative services
|
|
15,636
|
|
14,476
|
|
30,825
|
|
28,789
|
Administrative
services reimbursement revenue
|
|
184,466
|
|
160,675
|
|
357,293
|
|
324,002
|
Service agreement
revenue
|
|
6,429
|
|
6,437
|
|
12,788
|
|
12,915
|
Total operating
revenue
|
|
839,870
|
|
726,143
|
|
1,592,335
|
|
1,398,253
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Cost of operations -
policy issuance and renewal services
|
|
521,246
|
|
461,468
|
|
990,341
|
|
885,939
|
Cost of operations -
administrative services
|
|
184,466
|
|
160,675
|
|
357,293
|
|
324,002
|
Total operating
expenses
|
|
705,712
|
|
622,143
|
|
1,347,634
|
|
1,209,941
|
Operating
income
|
|
134,158
|
|
104,000
|
|
244,701
|
|
188,312
|
|
|
|
|
|
|
|
|
|
Investment
income
|
|
|
|
|
|
|
|
|
Net investment
income
|
|
13,535
|
|
8,268
|
|
15,718
|
|
18,772
|
Net realized and
unrealized investment losses
|
|
(1,737)
|
|
(10,324)
|
|
(7,019)
|
|
(17,603)
|
Net impairment losses
recognized in earnings
|
|
(171)
|
|
(38)
|
|
(1,804)
|
|
(254)
|
Total investment
income (loss)
|
|
11,627
|
|
(2,094)
|
|
6,895
|
|
915
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
—
|
|
895
|
|
—
|
|
1,894
|
Other income
|
|
3,305
|
|
337
|
|
6,642
|
|
810
|
Income before income
taxes
|
|
149,090
|
|
101,348
|
|
258,238
|
|
188,143
|
Income tax
expense
|
|
31,238
|
|
21,201
|
|
54,145
|
|
39,377
|
Net
income
|
|
$
117,852
|
|
$
80,147
|
|
$
204,093
|
|
$
148,766
|
|
|
|
|
|
|
|
|
|
Net income per
share
|
|
|
|
|
|
|
|
|
Class A common
stock – basic
|
|
$
2.53
|
|
$
1.72
|
|
$
4.38
|
|
$
3.19
|
Class A common
stock – diluted
|
|
$
2.25
|
|
$
1.53
|
|
$
3.90
|
|
$
2.84
|
Class B common
stock – basic and diluted
|
|
$
380
|
|
$
258
|
|
$
657
|
|
$
479
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – Basic
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
46,189,026
|
|
46,188,845
|
|
46,188,923
|
|
46,188,803
|
Class B common
stock
|
|
2,542
|
|
2,542
|
|
2,542
|
|
2,542
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – Diluted
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
52,299,974
|
|
52,296,139
|
|
52,298,298
|
|
52,298,321
|
Class B common
stock
|
|
2,542
|
|
2,542
|
|
2,542
|
|
2,542
|
|
|
|
|
|
|
|
|
|
Dividends declared
per share
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
$
1.19
|
|
$
1.11
|
|
$
2.38
|
|
$
2.22
|
Class B common
stock
|
|
$
178.50
|
|
$
166.50
|
|
$
357.00
|
|
$
333.00
|
Erie Indemnity
Company
Statements of
Financial Position
(in
thousands)
|
|
|
|
June 30,
2023
|
|
December 31,
2022
|
|
|
(Unaudited)
|
|
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
142,996
|
|
$
142,090
|
Available-for-sale
securities
|
|
63,510
|
|
24,267
|
Receivables from Erie
Insurance Exchange and affiliates, net
|
|
591,008
|
|
524,937
|
Prepaid expenses and
other current assets
|
|
66,399
|
|
79,201
|
Accrued investment
income
|
|
8,890
|
|
8,301
|
Total current
assets
|
|
872,803
|
|
778,796
|
|
|
|
|
|
Available-for-sale
securities, net
|
|
857,442
|
|
870,394
|
Equity
securities
|
|
77,220
|
|
72,560
|
Fixed assets,
net
|
|
422,903
|
|
413,874
|
Agent loans,
net
|
|
60,367
|
|
60,537
|
Other assets
|
|
34,776
|
|
43,295
|
Total
assets
|
|
$
2,325,511
|
|
$
2,239,456
|
|
|
|
|
|
Liabilities and
shareholders' equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Commissions
payable
|
|
$
347,795
|
|
$
300,028
|
Agent
bonuses
|
|
37,443
|
|
95,166
|
Accounts payable and
accrued liabilities
|
|
164,718
|
|
165,915
|
Dividends
payable
|
|
55,419
|
|
55,419
|
Contract
liability
|
|
39,046
|
|
36,547
|
Deferred executive
compensation
|
|
7,672
|
|
12,036
|
Total current
liabilities
|
|
652,093
|
|
665,111
|
|
|
|
|
|
Defined benefit pension
plans
|
|
55,075
|
|
51,224
|
Contract
liability
|
|
18,892
|
|
17,895
|
Deferred executive
compensation
|
|
13,539
|
|
13,724
|
Deferred income taxes,
net
|
|
15,647
|
|
14,075
|
Other long-term
liabilities
|
|
25,353
|
|
29,019
|
Total
liabilities
|
|
780,599
|
|
791,048
|
|
|
|
|
|
Shareholders'
equity
|
|
1,544,912
|
|
1,448,408
|
Total liabilities
and shareholders' equity
|
|
$
2,325,511
|
|
$
2,239,456
|
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SOURCE Erie Indemnity Company