Erie Indemnity Reports Full Year and Fourth Quarter 2021 Results

Rhea-AI Summary

Erie Indemnity Company (NASDAQ: ERIE) reported a net income of $297.9 million, or $5.69 per diluted share, for 2021, a slight increase from $293.3 million, or $5.61 per diluted share, in 2020. However, the fourth quarter saw a net income drop to $55.0 million from $62.8 million year-over-year. Operating income before taxes decreased by 5.9% for the full year and 4.9% for the fourth quarter. Management fee revenue from policy issuance rose by 3.9%, while costs increased significantly due to higher personnel and administrative expenses. Investment income notably improved, totaling $67.3 million for 2021.

Positive

• Net income for 2021 increased to $297.9 million, up from $293.3 million in 2020.
• Investment income improved significantly, totaling $67.3 million for 2021 compared to $32.9 million in 2020.
• Management fee revenue from policy issuance and renewal services increased by $71.4 million, or 3.9%, in 2021.

Negative

• Operating income before taxes decreased by $20.1 million, or 5.9%, in 2021 compared to 2020.
• Fourth quarter net income decreased to $55.0 million, down from $62.8 million in 2020.
• Non-commission expenses increased by $31.3 million in 2021 compared to 2020, impacting profitability.

ERIE, Pa., Feb. 24, 2022 /PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the full year and quarter ending December 31, 2021.  Net income was $297.9 million, or $5.69 per diluted share, in 2021, compared to $293.3 million, or $5.61 per diluted share, in 2020.  Net income was $55.0 million, or $1.05 per diluted share, in the fourth quarter of 2021, compared to $62.8 million, or $1.20 per diluted share, in the fourth quarter of 2020.

The uncertainty resulting from COVID-19 and subsequent resulting conditions continues to evolve and the ultimate impact and duration remain uncertain at this time.

4Q and Full Year 2021
(dollars in thousands)	4Q'21	4Q'20		2021	2020
Operating income	$        61,834	$        65,052		$      318,097	$      338,157
Investment income	12,328	14,071		67,332	32,867
Interest and other expense, net	4,335	913		9,025	2,509
Income before income taxes	69,827	78,210		376,404	368,515
Income tax expense	14,785	15,425		78,544	75,211
Net income	$        55,042	$        62,785		$      297,860	$      293,304

2021 Full Year Highlights

Operating income before taxes decreased $20.1 million, or 5.9 percent, in 2021 compared to 2020.

• Management fee revenue - policy issuance and renewal services increased $71.4 million, or 3.9 percent, in 2021 compared to 2020.
• Management fee revenue allocated to administrative services decreased $1.2 million, or 2.0 percent, in 2021 compared to 2020.
• Cost of operations - policy issuance and renewal services
• Commissions increased $57.2 million in 2021 compared to 2020 resulting from higher direct and affiliated assumed premiums written by the Exchange and higher agent incentive compensation.
• Non-commission expense increased $31.3 million in 2021 compared to 2020. Underwriting and policy processing costs increased $4.5 million primarily due to increased personnel costs and underwriting report costs. Information technology costs increased $11.3 million primarily due to increased hardware and software costs and personnel costs. Administrative and other expenses increased $14.2 million primarily driven by increased professional fees and building and equipment depreciation. Personnel costs in all categories were impacted by higher medical costs compared to the prior year as the COVID-19 pandemic reduced elective procedures in 2020.
• The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $638.5 million in 2021 and $609.4 million in 2020, but had no net impact on operating income.

Income from investments before taxes totaled $67.3 million in 2021 compared to $32.9 million in 2020.  Net investment income was $62.2 million in 2021 compared to $29.8 million in 2020. Included in net investment income is $31.7 million of limited partnership earnings in 2021 compared to limited partnership losses of $0.6 million in 2020.  Net realized and unrealized gains on investments were $4.9 million in 2021 compared to $6.4 million in 2020. 

4Q 2021 Highlights

Operating income before taxes decreased $3.2 million, or 4.9 percent, in the fourth quarter of 2021 compared to the fourth quarter of 2020.

• Management fee revenue - policy issuance and renewal services increased $20.6 million, or 4.8 percent, in the fourth quarter of 2021 compared to the fourth quarter of 2020.
• Management fee revenue allocated to administrative services decreased $0.7 million, or 4.5 percent in the fourth quarter of 2021 compared to the fourth quarter of 2020.
• Cost of operations - policy issuance and renewal services
• Commissions increased $18.2 million in the fourth quarter of 2021 compared to the fourth quarter of 2020 primarily driven by direct and affiliated assumed written premium growth.
• Non-commission expense increased $4.6 million in the fourth quarter of 2021 compared to the fourth quarter of 2020 driven by increases in underwriting and policy processing costs, administrative and other expenses, and customer service costs.
• The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $165.4 million and $158.2 million in the fourth quarter of 2021 and 2020, respectively, but had no net impact on operating income.

Income from investments before taxes totaled $12.3 million in the fourth quarter of 2021 compared to $14.1 million in the fourth quarter of 2020.  Net investment income was $12.6 million in the fourth quarter of 2021 compared to $9.4 million in the fourth quarter of 2020.  Included in net investment income is $5.0 million of limited partnership earnings in the fourth quarter of 2021 compared to $1.8 million in the fourth quarter of 2020. Net realized and unrealized losses on investments were $0.2 million in the fourth quarter of 2021 compared to net realized and unrealized gains of $4.8 million in the fourth quarter of 2020.

Webcast Information
Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on February 25, 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 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;
• 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 December 31,				Twelve months ended December 31,
		2021		2020		2021		2020
		(Unaudited)
Operating revenue
Management fee revenue - policy issuance and renewal services		$        450,286		$        429,698		$     1,913,166		$     1,841,794
Management fee revenue - administrative services		14,301		14,969		58,286		59,463
Administrative services reimbursement revenue		165,350		158,206		638,483		609,435
Service agreement revenue		5,994		6,379		24,042		25,797
Total operating revenue		635,931		609,252		2,633,977		2,536,489
Operating expenses
Cost of operations - policy issuance and renewal services		408,747		385,994		1,677,397		1,588,897
Cost of operations - administrative services		165,350		158,206		638,483		609,435
Total operating expenses		574,097		544,200		2,315,880		2,198,332
Operating income		61,834		65,052		318,097		338,157
Investment income
Net investment income		12,572		9,400		62,177		29,753
Net realized and unrealized investment (losses) gains		(237)		4,757		4,946		6,392
Net impairment (losses) recoveries recognized in earnings		(7)		(86)		209		(3,278)
Total investment income		12,328		14,071		67,332		32,867
Interest expense, net		1,050		723		4,132		731
Other expense		3,285		190		4,893		1,778
Income before income taxes		69,827		78,210		376,404		368,515
Income tax expense		14,785		15,425		78,544		75,211
Net income		$          55,042		$          62,785		$        297,860		$        293,304
Earnings Per Share
Net income per share
Class A common stock – basic		$              1.18		$              1.35		$              6.40		$              6.30
Class A common stock – diluted		$              1.05		$              1.20		$              5.69		$              5.61
Class B common stock – basic and diluted		$               177		$               202		$               959		$               945
Weighted average shares outstanding – Basic
Class A common stock		46,189,068		49,189,001		46,188,806		46,188,659
Class B common stock		2,542		2,542		2,542		2,542
Weighted average shares outstanding – Diluted
Class A common stock		52,305,628		52,315,670		52,307,302		52,313,360
Class B common stock		2,542		2,542		2,542		2,542
Dividends declared per share
Class A common stock		$            1.110		$            3.035		$            4.215		$            5.930
Class B common stock		$          166.50		$          455.25		$          632.25		$          889.50

 

Erie Indemnity Company Statements of Financial Position (in thousands)
		December 31, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents		$                   183,702		$                   161,240
Available-for-sale securities		38,396		17,697
Equity securities		0		19
Receivables from Erie Insurance Exchange and affiliates, net		479,123		494,637
Prepaid expenses and other current assets		56,206		52,561
Accrued investment income		6,303		6,146
Total current assets		763,730		732,300
Available-for-sale securities, net		907,689		910,539
Equity securities		87,743		94,071
Fixed assets, net		374,802		265,341
Agent loans, net		58,683		62,449
Deferred income taxes, net		145		12,341
Other assets		49,265		40,081
Total assets		$                2,242,057		$                2,117,122
Liabilities and shareholders' equity
Current liabilities:
Commissions payable		$                   270,746		$                   262,338
Agent bonuses		120,437		110,158
Accounts payable and accrued liabilities		138,317		150,706
Dividends payable		51,693		48,200
Contract liability		34,935		36,917
Deferred executive compensation		12,637		17,319
Current portion of long-term borrowings		2,098		2,031
Total current liabilities		630,863		627,669
Defined benefit pension plan		130,383		164,346
Long-term borrowings		91,734		93,833
Contract liability		17,686		18,878
Deferred executive compensation		14,571		14,904
Other long-term liabilities		14,342		9,444
Total liabilities		899,579		929,074
Shareholders' equity		1,342,478		1,188,048
Total liabilities and shareholders' equity		$                2,242,057		$                2,117,122

 

View original content to download multimedia:https://www.prnewswire.com/news-releases/erie-indemnity-reports-full-year-and-fourth-quarter-2021-results-301488878.html

SOURCE Erie Indemnity Company

FAQ

What were Erie Indemnity Company's financial results for 2021?

Erie Indemnity reported a net income of $297.9 million for 2021, an increase from $293.3 million in 2020.

How did Erie Indemnity's fourth quarter 2021 performance compare to the previous year?

In the fourth quarter of 2021, Erie Indemnity's net income decreased to $55.0 million from $62.8 million in 2020.

What drove the increase in investment income for Erie Indemnity in 2021?

Investment income for Erie Indemnity improved to $67.3 million in 2021, up from $32.9 million in 2020, largely due to better performance in limited partnership earnings.

Did Erie Indemnity experience an increase in operating income in 2021?

No, operating income before taxes decreased by $20.1 million, or 5.9%, in 2021 compared to the previous year.

What was the trend in management fee revenue for Erie Indemnity in 2021?

Management fee revenue from policy issuance and renewal services increased by $71.4 million, or 3.9%, in 2021.