Erie Indemnity Reports First Quarter 2022 Results

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Erie Indemnity Company (NASDAQ: ERIE) reported a net income of $68.6 million for Q1 2022, translating to $1.31 per diluted share, down from $73.6 million or $1.41 per diluted share in the same period last year. Operating income increased 10.8% to $84.3 million, while management fee revenue rose 7.1% to $32.3 million. Investment income, however, fell sharply to $3.0 million from $18.0 million due to realized losses. Administrative costs increased alongside commissions, impacting overall profitability.

Positive

• Operating income before taxes rose by $8.2 million, or 10.8%, compared to Q1 2021.
• Management fee revenue for policy issuance and renewal services increased by $32.3 million, or 7.1%.

Negative

• Net income decreased by $5 million, from $73.6 million in Q1 2021 to $68.6 million in Q1 2022.
• Investment income plummeted to $3 million from $18 million year-over-year, including $7.3 million in net realized and unrealized losses on investments.

Net Income was $68.6 million, Earnings per Diluted Share was $1.31

ERIE, Pa., April 28, 2022 /PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter ending March 31, 2022.  Net income was $68.6 million, or $1.31 per diluted share, in the first quarter of 2022, compared to $73.6 million, or $1.41 per diluted share, in the first quarter of 2021. 

1Q 2022
(in thousands)	1Q'22	1Q'21
Operating income	$        84,312	$        76,095
Investment income	3,009	17,988
Interest expense and other, net	526	1,528
Income before income taxes	86,795	92,555
Income tax expense	18,176	18,989
Net income	$        68,619	$        73,566
1Q 2022 Highlights

Operating income before taxes increased $8.2 million, or 10.8 percent, in the first quarter of 2022 compared to the first quarter of 2021.

• Management fee revenue - policy issuance and renewal services increased $32.3 million, or 7.1 percent, in the first quarter of 2022 compared to the first quarter of 2021.
• Management fee revenue - administrative services decreased $0.5 million, or 3.6 percent, in the first quarter of 2022 compared to the first quarter of 2021.
• Cost of operations - policy issuance and renewal services
•  
• Commissions increased $19.8 million in the first quarter of 2022 compared to the first quarter of 2021, primarily driven by the growth in direct and affiliated assumed written premium, primarily in lines of business that pay a higher commission rate. 
• Non-commission expense increased $4.2 million in the first quarter of 2022 compared to the first quarter of 2021.  Sales and advertising increased $1.8 million primarily due to agent related expenses.  Administrative and other costs increased $3.1 million primarily due to an increase in professional fees compared to the same period in 2021. 

Income from investments before taxes totaled $3.0 million in the first quarter of 2022 compared to $18.0 million in the first quarter of 2021.  Net investment income was $10.5 million in the first quarter of 2022 compared to $17.1 million in the first quarter of 2021.  Included in net investment income is $2.8 million of limited partnership earnings in the first  quarter of 2022 compared to $9.0 million in the first quarter of 2021.  Net realized and unrealized losses on investments were $7.3 million in the first quarter of 2022 compared to net realized and unrealized gains of $0.8 million in the first quarter of 2021.

Webcast Information
Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on April 29, 2022.  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 12^th largest homeowners insurer, 13^th 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;
• emergence of significant unexpected events, including pandemics;
• 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 March 31,
		2022		2021
		(Unaudited)
Operating revenue
Management fee revenue - policy issuance and renewal services		$         487,992		$        455,718
Management fee revenue - administrative services		14,313		14,847
Administrative services reimbursement revenue		163,327		153,533
Service agreement revenue		6,478		6,079
Total operating revenue		672,110		630,177
Operating expenses
Cost of operations - policy issuance and renewal services		424,471		400,549
Cost of operations - administrative services		163,327		153,533
Total operating expenses		587,798		554,082
Operating income		84,312		76,095
Investment income
Net investment income		10,504		17,097
Net realized and unrealized investment (losses) gains		(7,279)		804
Net impairment (losses) recoveries recognized in earnings		(216)		87
Total investment income		3,009		17,988
Interest expense		999		1,009
Other income (expense)		473		(519)
Income before income taxes		86,795		92,555
Income tax expense		18,176		18,989
Net income		$           68,619		$          73,566
Net income per share
Class A common stock – basic		$                1.47		$               1.58
Class A common stock – diluted		$                1.31		$               1.41
Class B common stock – basic and diluted		$                 221		$                237
Weighted average shares outstanding – Basic
Class A common stock		46,188,761		46,188,860
Class B common stock		2,542		2,542
Weighted average shares outstanding – Diluted
Class A common stock		52,300,501		52,315,958
Class B common stock		2,542		2,542
Dividends declared per share
Class A common stock		$              1.110		$             1.035
Class B common stock		$           166.50		$          155.25

 

Erie Indemnity Company Statements of Financial Position (in thousands)
		March 31, 2022		December 31, 2021
		(Unaudited)
Assets
Current assets:
Cash and cash equivalents		$         141,305		$         183,702
Available-for-sale securities		46,155		38,396
Receivables from Erie Insurance Exchange and affiliates, net		478,754		479,123
Prepaid expenses and other current assets		78,877		56,206
Accrued investment income		6,255		6,303
Total current assets		751,346		763,730
Available-for-sale securities, net		877,165		907,689
Equity securities		78,069		87,743
Fixed assets, net		396,072		374,802
Agent loans, net		61,579		58,683
Deferred income taxes, net		9,818		145
Other assets		49,804		49,265
Total assets		$      2,223,853		$     2,242,057
Liabilities and shareholders' equity
Current liabilities:
Commissions payable		$         287,989		$         270,746
Agent bonuses		31,507		120,437
Accounts payable and accrued liabilities		186,386		138,317
Dividends payable		51,693		51,693
Contract liability		34,872		34,935
Deferred executive compensation		6,752		12,637
Current portion of long-term borrowings		2,132		2,098
Total current liabilities		601,331		630,863
Defined benefit pension plans		139,231		130,383
Long-term borrowings		91,177		91,734
Contract liability		17,493		17,686
Deferred executive compensation		13,821		14,571
Other long-term liabilities		26,600		14,342
Total liabilities		889,653		899,579
Shareholders' equity		1,334,200		1,342,478
Total liabilities and shareholders' equity		$      2,223,853		$     2,242,057

 

 

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SOURCE Erie Indemnity Company

FAQ

What were Erie Indemnity's Q1 2022 earnings results?

Erie Indemnity reported a net income of $68.6 million, or $1.31 per diluted share, for Q1 2022.

How did Erie Indemnity's operating income perform in Q1 2022?

Operating income before taxes increased by $8.2 million, or 10.8%, compared to Q1 2021.

What caused the drop in investment income for Erie Indemnity in Q1 2022?

Investment income fell to $3 million from $18 million due to net realized and unrealized losses on investments.

What was Erie Indemnity's management fee revenue in Q1 2022?

Management fee revenue for policy issuance and renewal services increased by $32.3 million, or 7.1%, in Q1 2022.