Press Release
Erie Indemnity Reports Third Quarter 2021 Results
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 |
||||||
3Q 2021 Highlights |
Operating income before taxes decreased
- 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
Nine Months 2021 Highlights |
Operating income before taxes decreased
- 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 endedSeptember 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 endedSeptember 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
Webcast Information
Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on
According to A.M. Best Company, Erie Insurance Group, based in Erie,
News releases and more information are available on
"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
- 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.
|
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Statements of Operations |
||||||||||||||||||
(dollars in thousands, except per share data) |
||||||||||||||||||
Three months ended |
Nine months ended |
|||||||||||||||||
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 |
||||||||||
|
||||||||
Statements of Financial Position |
||||||||
(in thousands) |
||||||||
|
|
|||||||
(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
Robert Scalise, 814-870-2313, Robert.scalise@erieinsurance.com