Erie Indemnity Reports First Quarter 2021 Results

ERIE, Pa., April 29, 2021 /PRNewswire/ — Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter ending March 31,…

ERIE, Pa., April 29, 2021 /PRNewswire/ — Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter ending March 31, 2021.  Net income was $73.6 million, or $1.41 per diluted share, in the first quarter of 2021, compared to $59.3 million, or $1.13 per diluted share, in the first quarter 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. 

1Q 2021

(in thousands)

1Q’21

1Q’20


Operating income

$

76,095


$

85,691



Investment income (loss)

17,988


(9,195)



Interest and other expense, net                                                                               

1,528


369



Income before income taxes

92,555


76,127



Income tax expense

18,989


16,801



Net income

$

73,566


$

59,326








 

                                   1Q 2021 Highlights                                   

Operating income before taxes decreased $9.6 million, or 11.2 percent, in the first quarter of 2021 compared to the first quarter of 2020.

  • Management fee revenue – policy issuance and renewal services increased $12.0 million, or 2.7 percent, in the first quarter of 2021 compared to the first quarter of 2020.
  • Management fee revenue – administrative services increased $0.1 million, or 0.5 percent, in the first quarter of 2021 compared to the first quarter of 2020.
  • Cost of operations – policy issuance and renewal services
    • Commissions increased $9.4 million in the first quarter of 2021 compared to the first 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 first quarter of 2021 compared to the first quarter of 2020.
    • Non-commission expense increased $11.7 million in the first quarter of 2021 compared to the first quarter of 2020. Underwriting and policy processing expense decreased $0.8 million primarily due to lower personnel costs. Information technology costs increased $4.2 million primarily due to increased hardware and software costs and professional fees. Administrative and other costs increased $8.5 million primarily driven by increased professional fees and higher incentive plan award accruals due to improved performance in the first quarter of 2021 compared to the same period in 2020.

Income from investments before taxes totaled $18.0 million in the first quarter of 2021 compared to a loss from investments of $9.2 million in the first quarter of 2020.  Net investment income was $17.1 million in the first quarter of 2021 compared to $4.7 million in the first quarter of 2020.  Included in net investment income is $9.0 million of limited partnership earnings in the first quarter of 2021 and $3.7 million of limited partnership losses in the first quarter of 2020.  Net realized gains on investments were $0.8 million in the first quarter of 2021 compared to net realized losses of $10.8 million in the first quarter of 2020.  Investment losses experienced during the first quarter of 2020 were primarily due to the significant financial market volatility resulting from the COVID-19 pandemic.

Webcast Information

Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on April 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 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 March  31,




2021


2020




(Unaudited)


Operating revenue






Management fee revenue – policy issuance and renewal services, net


$

455,718



$

443,750



Management fee revenue – administrative services, net


14,847



14,771



Administrative services reimbursement revenue


153,533



151,554



Service agreement revenue


6,079



6,662



  Total operating revenue


630,177



616,737









Operating expenses






Cost of operations – policy issuance and renewal services


400,549



379,492



Cost of operations – administrative services


153,533



151,554



  Total operating expenses


554,082



531,046



Operating income


76,095



85,691









Investment income






Net investment income


17,097



4,664



Net realized investment gains (losses)


804



(10,806)



Net impairment recoveries (losses) recognized in earnings


87



(3,053)



Total investment income (loss)


17,988



(9,195)









Interest expense, net


1,009



3



Other expense


519



366



Income before income taxes


92,555



76,127



Income tax expense


18,989



16,801



Net income


$

73,566



$

59,326









Net income per share






Class A common stock – basic


$

1.58



$

1.27



Class A common stock – diluted


$

1.41



$

1.13



Class B common stock – basic and diluted


$

237



$

191









Weighted average shares outstanding – Basic






Class A common stock


46,188,860



46,188,789



Class B common stock


2,542



2,542









Weighted average shares outstanding – Diluted






Class A common stock


52,315,958



52,324,350



Class B common stock


2,542



2,542









Dividends declared per share






Class A common stock


$

1.035



$

0.965



Class B common stock


$

155.25



$

144.75



 

 

Erie Indemnity Company

Statements of Financial Position

(in thousands)




March 31,

2021


December 31,

2020



(Unaudited)



Assets





Current assets:





Cash and cash equivalents


$

135,192



$

161,240


Available-for-sale securities


16,847



17,697


Equity securities


146



19


Receivables from Erie Insurance Exchange and affiliates, net


481,481



494,637


Prepaid expenses and other current assets


62,401



52,561


Accrued investment income


5,860



6,146


Total current assets


701,927



732,300







Available-for-sale securities, net


901,475



910,539


Equity securities


92,785



94,071


Fixed assets, net


282,268



265,341


Agent loans, net


59,916



62,449


Deferred income taxes, net


16,454



12,341


Other assets


44,273



40,081


Total assets


$

2,099,098



$

2,117,122







Liabilities and shareholders’ equity





Current liabilities:





Commissions payable


$

272,670



$

262,338


Agent bonuses


30,766



110,158


Accounts payable and accrued liabilities


168,127



150,706


Dividends payable


48,200



48,200


Contract liability


35,799



36,917


Deferred executive compensation


13,825



17,319


Current portion of long-term borrowings


2,053



2,031


Total current liabilities


571,440



627,669







Defined benefit pension plans


174,228



164,346


Long-term borrowings


93,311



93,833


Contract liability


18,276



18,878


Deferred executive compensation


16,648



14,904


Other long-term liabilities


17,062



9,444


Total liabilities


890,965



929,074







Shareholders’ equity


1,208,133



1,188,048


Total liabilities and shareholders’ equity


$

2,099,098



$

2,117,122


 

 

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SOURCE Erie Indemnity Company