Erie Indemnity Reports Second Quarter 2024 Results

Rhea-AI Summary

Erie Indemnity Company (NASDAQ: ERIE) reported strong financial results for Q2 and H1 2024. Net income for Q2 2024 was $163.9 million ($3.13 per diluted share), up from $117.9 million ($2.25 per diluted share) in Q2 2023. For H1 2024, net income reached $288.5 million ($5.52 per diluted share), compared to $204.1 million ($3.90 per diluted share) in H1 2023.

Operating income before taxes increased by 41.8% in Q2 and 34.5% in H1 2024 compared to the same periods in 2023. Management fee revenue from policy issuance and renewal services grew by 20.1% in Q2 and 19.7% in H1 2024. Income from investments before taxes also improved, totaling $13.8 million in Q2 and $28.9 million in H1 2024.

Positive

• Net income increased by 39% in Q2 2024 compared to Q2 2023
• Operating income before taxes grew by 41.8% in Q2 2024
• Management fee revenue from policy issuance and renewal services increased by 20.1% in Q2 2024
• Income from investments before taxes improved in both Q2 and H1 2024

Negative

• Non-commission expenses increased by $4.1 million in Q2 2024
• Administrative and other costs rose by $8.0 million in H1 2024

Financial Analyst

Erie Indemnity's Q2 2024 results showcase impressive growth and financial strength. Net income surged by 39% year-over-year to $163.9 million, translating to earnings per diluted share of $3.13, up from $2.25 in Q2 2023. This substantial increase is primarily driven by a robust 41.8% jump in operating income before taxes.

The company's core business performance is particularly noteworthy. Management fee revenue from policy issuance and renewal services grew by 20.1%, indicating strong customer retention and new business acquisition. This growth outpaced the increase in commissions, suggesting improved operational efficiency.

Interestingly, while non-commission expenses rose, there were some areas of cost reduction, particularly in information technology. This could indicate strategic investments in automation or process improvements, potentially setting the stage for future margin expansion.

The investment portfolio also performed well, with income from investments before taxes increasing by 19% year-over-year. This diversified revenue stream adds stability to Erie's financial profile.

Looking at the broader picture, Erie's position as the 12th largest homeowners insurer and 13th largest auto and commercial lines insurer in the U.S. speaks to its competitive standing. The A+ rating from A.M. Best further underscores its financial strength and stability.

For investors, these results paint a picture of a well-managed, growing company in a stable industry. However, it's important to monitor how Erie navigates challenges such as inflation and potential increases in claims frequency or severity, which could impact future profitability.

Insurance Industry Expert

Erie Indemnity's Q2 2024 results reflect a company adeptly navigating the complex insurance landscape. The 20.1% increase in management fee revenue from policy issuance and renewal services is particularly impressive, outpacing the industry average and suggesting strong market share gains or premium rate increases, or both.

The growth in commissions, while substantial at $68.8 million, is proportionate to the increase in premium volume. This indicates that Erie is maintaining its agent relationships effectively while growing its business - a important balance in the agency-driven insurance model.

One area of interest is the decrease in information technology costs. In an era where digital transformation is important for insurers, this reduction could be seen two ways: either as efficient cost management or as a potential risk if it represents underinvestment in critical infrastructure. Future quarters will reveal which interpretation is correct.

The increase in underwriting and policy processing expenses, coupled with higher customer service costs, suggests Erie is investing in its core operations. This could lead to improved customer satisfaction and retention, key metrics in the insurance industry.

Erie's position as a top-15 insurer in multiple lines (home, auto, commercial) demonstrates a well-diversified portfolio, which helps mitigate risks associated with any single line of business. This diversification, combined with strong financial performance, positions Erie well to weather potential economic headwinds or increased claims activity.

Overall, these results indicate a company executing well on its strategy, but investors should keep an eye on loss ratios and combined ratios in future reports to ensure this growth is profitable and sustainable.

Net Income per Diluted Share was $3.13 for the Quarter and $5.52 for the Six Months of 2024

ERIE, Pa., July 25, 2024 /PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter and six months ending June 30, 2024.  Net income was $163.9 million, or $3.13 per diluted share, in the second quarter of 2024, compared to $117.9 million, or $2.25 per diluted share, in the second quarter of 2023.  Net income was $288.5 million, or $5.52 per diluted share, in the first six months of 2024, compared to $204.1 million, or $3.90 per diluted share, in the first six months of 2023.

2Q and First Half 2024
(in thousands)	2Q'24	2Q'23	1H'24	1H'23
Operating income	$      190,208	$      134,158	$      329,020	$      244,701
Investment income	13,827	11,627	28,906	6,895
Other income	3,292	3,305	6,703	6,642
Income before income taxes	207,327	149,090	364,629	258,238
Income tax expense	43,424	31,238	76,174	54,145
Net income	$      163,903	$      117,852	$      288,455	$      204,093

 

2Q 2024 Highlights

Operating income before taxes increased $56.1 million, or 41.8 percent, in the second quarter of 2024 compared to the second quarter of 2023.

• Management fee revenue - policy issuance and renewal services increased $127.5 million, or 20.1 percent, in the second quarter of 2024 compared to the second quarter of 2023.
• Management fee revenue - administrative services increased $1.4 million, or 9.0 percent, in the second quarter of 2024 compared to the second quarter of 2023.
• Cost of operations - policy issuance and renewal services
  • Commissions increased $68.8 million in the second quarter of 2024 compared to the second quarter of 2023, primarily driven by the growth in direct and affiliated assumed written premium and, to a lesser extent, an increase in agent incentive compensation related to profitable growth.
  • Non-commission expense increased $4.1 million in the second quarter of 2024 compared to the second quarter of 2023. Underwriting and policy processing expense increased $4.2 million primarily due to increased underwriting report and personnel costs. Information technology costs decreased $3.8 million primarily due to a decrease in professional fees and personnel costs. Customer service costs increased $2.0 million primarily due to increased personnel costs and credit card processing fees.

Income from investments before taxes totaled $13.8 million in the second quarter of 2024 compared to $11.6 million in the second quarter of 2023.  Net investment income was $16.0 million in the second quarter of 2024 compared to $13.5 million in the second quarter of 2023. 

First Half 2024 Highlights

Operating income before taxes increased $84.3 million, or 34.5 percent, in the first six months of 2024 compared to the first six months of 2023.

• Management fee revenue - policy issuance and renewal services increased $235.1 million, or 19.7 percent, in the first six months of 2024 compared to the first six months of 2023.
• Management fee revenue - administrative services increased $3.2 million, or 10.3 percent, in the first six months of 2024 compared to the first six months of 2023.
• Cost of operations - policy issuance and renewal services
  • Commissions increased $135.8 million in the first six months of 2024 compared to the first six months of 2023, primarily driven by the growth in direct and affiliated assumed written premium and, to a lesser extent, an increase in agent incentive compensation related to profitable growth.
  • Non-commission expense increased $18.4 million in the first six months of 2024 compared to the first six months of 2023. Underwriting and policy processing expense increased $8.7 million primarily due to increased underwriting report and personnel costs. Information technology costs decreased $7.5 million primarily due to a decrease in professional fees and personnel costs largely driven by an increase in capitalized labor costs related to technology initiatives. Sales and advertising expense increased $5.2 million primarily due to increased agent-related and advertising costs. Customer service costs increased $4.0 million primarily due to increased personnel costs and credit card processing fees. Administrative and other costs increased $8.0 million primarily due to increased personnel costs, charitable contributions and professional fees.

Income from investments before taxes totaled $28.9 million in the first six months of 2024 compared to $6.9 million in the first six months of 2023.  Net investment income was $31.9 million in the first six months of 2024 compared to $15.7 million in the first six months of 2023.  Net investment income included $0.3 million of limited partnership earnings in the first six months of 2024 compared to losses of $10.7 million in the first six months of 2023.  Net realized and unrealized gains were $0.1 million in the first six months of 2024 compared to losses of $7.0 million in the first six months of 2023.

Webcast Information

Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on July 26, 2024.  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 13^th 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 17^th 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 7 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, including technological innovations;
  • dependence upon the independent agency system; and
  • ability to maintain our brand, including 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 economic or social 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 subscribers at 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;
• compliance with complex and evolving laws and regulations and outcome of pending and potential litigation;
• factors affecting the quality and liquidity of our investment portfolio; and
• 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,
		2024		2023		2024		2023
		(Unaudited)				(Unaudited)
Operating revenue
Management fee revenue - policy issuance and renewal services		$        760,886		$        633,339		$   1,426,572		$   1,191,429
Management fee revenue - administrative services		17,051		15,636		33,985		30,825
Administrative services reimbursement revenue		206,028		184,466		397,595		357,293
Service agreement revenue		6,473		6,429		12,987		12,788
Total operating revenue		990,438		839,870		1,871,139		1,592,335
Operating expenses
Cost of operations - policy issuance and renewal services		594,202		521,246		1,144,524		990,341
Cost of operations - administrative services		206,028		184,466		397,595		357,293
Total operating expenses		800,230		705,712		1,542,119		1,347,634
Operating income		190,208		134,158		329,020		244,701
Investment income
Net investment income		16,010		13,535		31,913		15,718
Net realized and unrealized investment (losses) gains		(1,795)		(1,737)		58		(7,019)
Net impairment losses recognized in earnings		(388)		(171)		(3,065)		(1,804)
Total investment income		13,827		11,627		28,906		6,895
Other income		3,292		3,305		6,703		6,642
Income before income taxes		207,327		149,090		364,629		258,238
Income tax expense		43,424		31,238		76,174		54,145
Net income		$        163,903		$        117,852		$      288,455		$      204,093
Net income per share
Class A common stock – basic		$              3.52		$              2.53		$            6.19		$            4.38
Class A common stock – diluted		$              3.13		$              2.25		$            5.52		$            3.90
Class B common stock – basic and diluted		$               528		$               380		$             929		$             657
Weighted average shares outstanding – Basic
Class A common stock		46,189,042		46,189,026		46,189,028		46,188,923
Class B common stock		2,542		2,542		2,542		2,542
Weighted average shares outstanding – Diluted
Class A common stock		52,305,299		52,299,974		52,303,551		52,298,298
Class B common stock		2,542		2,542		2,542		2,542
Dividends declared per share
Class A common stock		$            1.275		$              1.19		$            2.55		$            2.38
Class B common stock		$          191.25		$          178.50		$        382.50		$        357.00

 

Erie Indemnity Company Statements of Financial Position (in thousands)
		June 30, 2024		December 31, 2023
		(Unaudited)
Assets
Current assets:
Cash and cash equivalents (includes restricted cash of $14,027 and $12,542, respectively)		$        170,634		$        144,055
Available-for-sale securities		47,734		82,017
Receivables from Erie Insurance Exchange and affiliates, net		708,171		625,338
Prepaid expenses and other current assets		83,529		69,321
Accrued investment income		10,204		9,458
Total current assets		1,020,272		930,189
Available-for-sale securities, net		946,525		879,224
Available-for-sale securities lent		6,125		0
Equity securities		80,128		84,253
Fixed assets, net		469,145		442,610
Agent loans, net		56,813		58,434
Defined benefit pension plan		65,221		34,320
Other assets, net		47,731		42,934
Total assets		$     2,691,960		$     2,471,964
Liabilities and shareholders' equity
Current liabilities:
Commissions payable		$        413,205		$        353,709
Agent incentive compensation		44,870		68,077
Accounts payable and accrued liabilities		198,689		175,622
Dividends payable		59,377		59,377
Contract liability		41,570		41,210
Deferred executive compensation		8,216		10,982
Securities lending payable		6,345		0
Total current liabilities		772,272		708,977
Defined benefit pension plan		26,591		26,260
Contract liability		20,645		19,910
Deferred executive compensation		16,341		20,936
Deferred income taxes, net		5,192		11,481
Other long-term liabilities		22,106		21,565
Total liabilities		863,147		809,129
Shareholders' equity		1,828,813		1,662,835
Total liabilities and shareholders' equity		$     2,691,960		$     2,471,964

 

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SOURCE Erie Indemnity Company

FAQ

What was Erie Indemnity's net income per diluted share for Q2 2024?

Erie Indemnity's net income per diluted share for Q2 2024 was $3.13.

How much did Erie Indemnity's (ERIE) management fee revenue increase in Q2 2024?

Erie Indemnity's management fee revenue from policy issuance and renewal services increased by 20.1% or $127.5 million in Q2 2024 compared to Q2 2023.

What was the percentage increase in Erie Indemnity's (ERIE) operating income before taxes for H1 2024?

Erie Indemnity's operating income before taxes increased by 34.5% in the first half of 2024 compared to the same period in 2023.

How did Erie Indemnity's (ERIE) investment income perform in Q2 2024?

Erie Indemnity's income from investments before taxes totaled $13.8 million in Q2 2024, an increase from $11.6 million in Q2 2023.