PR Newswire | Jul 29, 2021 04:16PM EDT

07/29 15:15 CDT

Erie Indemnity Reports Second Quarter 2021 ResultsNet Income per Diluted Share was $1.51 for the Quarter and $2.92 for the Six Months of 2021 ERIE, Pa., July 29, 2021

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, net1,587 260 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



2Q 2021 Highlights

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 InformationIndemnity 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 GroupAccording 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 46,187,80846,188,573 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 52,302,98152,309,163 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, December 31, 2021 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, net504,013 494,637

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



View original content to download multimedia: https://www.prnewswire.com/news-releases/erie-indemnity-reports-second-quarter-2021-results-301344324.html

SOURCE Erie Indemnity Company