PR Newswire | Oct 28, 2021 04:16PM EDT

10/28 15:15 CDT

Erie Indemnity Reports Third Quarter 2021 ResultsNet Income per Diluted Share was $1.72 for the Quarter and $4.64 for the Nine Months of 2021 ERIE, Pa., Oct. 28, 2021

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, net1,575 967 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 $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 InformationIndemnity 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 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 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, 2021December 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, net503,413 494,637

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