Erie Indemnity Reports First Quarter 2023 Results
Net Income was
1Q 2023 | |||
(in thousands) | 1Q'23 | 1Q'22 | |
Operating income | $ 110,543 | $ 84,312 | |
Investment (loss) income | (4,732) | 3,009 | |
Interest expense and other (income), net | (3,337) | 526 | |
Income before income taxes | 109,148 | 86,795 | |
Income tax expense | 22,907 | 18,176 | |
Net income | $ 86,241 | $ 68,619 | |
1Q 2023 Highlights |
Operating income before taxes increased
- Management fee revenue - policy issuance and renewal services increased
$70.1 million
- Management fee revenue - administrative services increased
$0.9 million
- Cost of operations - policy issuance and renewal services
- Commissions increased
$27.7 million
- Non-commission expense increased
$17.0 million $2.7 million $11.5 million $2.9 million
Loss from investments before taxes totaled
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According to A.M. Best Company, Erie Insurance Group, based in Erie,
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"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;
- emergence of significant unexpected events, including pandemics and inflation;
- 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.
Statements of Operations (dollars in thousands, except per share data) | ||||
Three months ended | ||||
2023 | 2022 | |||
(Unaudited) | ||||
Operating revenue | ||||
Management fee revenue - policy issuance and renewal services | $ 558,090 | $ 487,992 | ||
Management fee revenue - administrative services | 15,189 | 14,313 | ||
Administrative services reimbursement revenue | 172,827 | 163,327 | ||
Service agreement revenue | 6,359 | 6,478 | ||
Total operating revenue | 752,465 | 672,110 | ||
Operating expenses | ||||
Cost of operations - policy issuance and renewal services | 469,095 | 424,471 | ||
Cost of operations - administrative services | 172,827 | 163,327 | ||
Total operating expenses | 641,922 | 587,798 | ||
Operating income | 110,543 | 84,312 | ||
Investment income | ||||
Net investment income | 2,183 | 10,504 | ||
Net realized and unrealized investment losses | (5,282) | (7,279) | ||
Net impairment losses recognized in earnings | (1,633) | (216) | ||
Total investment (loss) income | (4,732) | 3,009 | ||
Interest expense | — | 999 | ||
Other income | 3,337 | 473 | ||
Income before income taxes | 109,148 | 86,795 | ||
Income tax expense | 22,907 | 18,176 | ||
Net income | $ 86,241 | $ 68,619 | ||
Net income per share | ||||
Class A common stock – basic | $ 1.85 | $ 1.47 | ||
Class A common stock – diluted | $ 1.65 | $ 1.31 | ||
Class B common stock – basic and diluted | $ 278 | $ 221 | ||
Weighted average shares outstanding – Basic | ||||
Class A common stock | 46,188,819 | 46,188,761 | ||
Class B common stock | 2,542 | 2,542 | ||
Weighted average shares outstanding – Diluted | ||||
Class A common stock | 52,296,621 | 52,300,501 | ||
Class B common stock | 2,542 | 2,542 | ||
Dividends declared per share | ||||
Class A common stock | $ 1.19 | $ 1.11 | ||
Class B common stock | $ 178.50 | $ 166.50 | ||
Statements of Financial Position (in thousands) | ||||
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(Unaudited) | ||||
Assets | ||||
Current assets: | ||||
Cash and cash equivalents | $ 122,376 | $ 142,090 | ||
Available-for-sale securities | 57,470 | 24,267 | ||
Receivables from Erie Insurance Exchange and affiliates, net | 533,306 | 524,937 | ||
Prepaid expenses and other current assets | 62,738 | 79,201 | ||
Accrued investment income | 8,191 | 8,301 | ||
Total current assets | 784,081 | 778,796 | ||
Available-for-sale securities, net | 858,196 | 870,394 | ||
Equity securities | 72,963 | 72,560 | ||
Fixed assets, net | 417,339 | 413,874 | ||
Agent loans, net | 59,315 | 60,537 | ||
Other assets | 32,075 | 43,295 | ||
Total assets | $ 2,223,969 | $ 2,239,456 | ||
Liabilities and shareholders' equity | ||||
Current liabilities: | ||||
Commissions payable | $ 322,910 | $ 300,028 | ||
Agent bonuses | 20,565 | 95,166 | ||
Accounts payable and accrued liabilities | 168,142 | 165,915 | ||
Dividends payable | 55,419 | 55,419 | ||
Contract liability | 37,187 | 36,547 | ||
Deferred executive compensation | 7,345 | 12,036 | ||
Total current liabilities | 611,568 | 665,111 | ||
Defined benefit pension plans | 53,522 | 51,224 | ||
Contract liability | 18,142 | 17,895 | ||
Deferred executive compensation | 12,634 | 13,724 | ||
Deferred income taxes, net | 16,081 | 14,075 | ||
Other long-term liabilities | 25,055 | 29,019 | ||
Total liabilities | 737,002 | 791,048 | ||
Shareholders' equity | 1,486,967 | 1,448,408 | ||
Total liabilities and shareholders' equity | $ 2,223,969 | $ 2,239,456 | ||
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