Erie Indemnity Reports Third Quarter 2022 Results
Erie Indemnity Company (NASDAQ: ERIE) announced its financial results for Q3 and the first nine months of 2022. The net income for Q3 was $84.3 million ($1.61 per diluted share), down from $90.2 million ($1.72) in Q3 2021. For the nine-month period, net income was $233.1 million ($4.46 per diluted share), compared to $242.8 million ($4.64) in 2021. Operating income before taxes increased by 12% in Q3 and 15% over the nine months. However, losses from investments resulted in decreased net investment income, which fell significantly compared to the prior year.
- Operating income before taxes increased 12.0% in Q3 2022 vs. Q3 2021.
- Management fee revenue for policy issuance rose by 9.3% in Q3 2022 vs. Q3 2021.
- Commissions increased by $21.6 million in Q3 2022, driven by premium growth.
- Net income decreased by 6.5% in Q3 2022 compared to Q3 2021.
- Net investment income dropped to $5.8 million in Q3 2022 from $18.9 million in Q3 2021.
- Net realized and unrealized losses on investments were $6.2 million in Q3 2022, contrasting with gains of $1.6 million in Q3 2021.
Net Income per Diluted Share was
ERIE, Pa., Oct. 27, 2022 /PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter and nine months ending September 30, 2022. Net income was
3Q and Nine Months 2022 | ||||||
(in thousands) | 3Q'22 | 3Q'21 | 2022 | 2021 | ||
Operating income | $ 106,472 | $ 95,103 | $ 294,784 | $ 256,263 | ||
Investment (loss) income | (571) | 20,598 | 344 | 55,004 | ||
Interest expense and other, net | (447) | 1,575 | 637 | 4,690 | ||
Income before income taxes | 106,348 | 114,126 | 294,491 | 306,577 | ||
Income tax expense | 22,035 | 23,903 | 61,412 | 63,759 | ||
Net income | $ 84,313 | $ 90,223 | $ 233,079 | $ 242,818 | ||
3Q 2022 Highlights |
Operating income before taxes increased
- Management fee revenue - policy issuance and renewal services increased
$46.8 million , or 9.3 percent, in the third quarter of 2022 compared to the third quarter of 2021. - Management fee revenue - administrative services increased
$0.2 million , or 1.3 percent, in the third quarter of 2022 compared to the third quarter of 2021. - Cost of operations - policy issuance and renewal services
- Commissions increased
$21.6 million in the third quarter of 2022 compared to the third quarter of 2021, primarily driven by the growth in direct and affiliated assumed written premium, partially offset by a decrease in agent incentive compensation. - Non-commission expense increased
$14.2 million in the third quarter of 2022 compared to the third quarter of 2021. Underwriting and policy processing expense increased$2.9 million primarily due to increased postage and underwriting report costs. Information technology costs increased$3.7 million primarily due to increased professional fees and hardware and software costs, partially offset by decreased personnel costs. Administrative and other costs increased$6.4 million primarily due to an increase in personnel costs related to compensation and increased professional fees.
Loss from investments before taxes totaled
Nine Months 2022 Highlights |
Operating income before taxes increased
- Management fee revenue - policy issuance and renewal services increased
$121.3 million , or 8.3 percent, in the first nine months of 2022 compared to the first nine months of 2021. - Management fee revenue - administrative services decreased
$0.5 million , or 1.2 percent, in the first nine months of 2022 compared to the first nine months of 2021. - Cost of operations - policy issuance and renewal services
- Commissions increased
$55.6 million in the first nine months of 2022 compared to the first nine months of 2021, primarily driven by the growth in direct and affiliated assumed written premium, partially offset by a decrease in agent incentive compensation. - Non-commission expense increased
$27.8 million in the first nine months of 2022 compared to the first nine months of 2021. Underwriting and policy processing expense increased$3.0 million primarily driven by increased underwriting report costs. Information technology costs increased$7.9 million primarily due to increased hardware and software costs and professional fees, partially offset by decreased personnel costs. Sales and advertising increased$3.1 million primarily due to agent related expenses. Administrative and other costs increased$15.0 million primarily driven by increased professional fees and personnel costs related to compensation. Personnel costs in all expense categories were also impacted by lower estimated costs for incentive plan awards related to underwriting performance.
Income from investments before taxes totaled
Webcast Information
Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on October 28, 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 11th 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 19th 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 | Nine months ended | |||||||
2022 | 2021 | 2022 | 2021 | |||||
(Unaudited) | (Unaudited) | |||||||
Operating revenue | ||||||||
Management fee revenue - policy issuance and renewal services | $ 551,666 | $ 504,891 | $ 1,584,213 | $ 1,462,880 | ||||
Management fee revenue - administrative services | 14,657 | 14,471 | 43,446 | 43,985 | ||||
Administrative services reimbursement revenue | 168,653 | 162,410 | 492,655 | 473,133 | ||||
Service agreement revenue | 6,260 | 6,067 | 19,175 | 18,048 | ||||
Total operating revenue | 741,236 | 687,839 | 2,139,489 | 1,998,046 | ||||
Operating expenses | ||||||||
Cost of operations - policy issuance and renewal services | 466,111 | 430,326 | 1,352,050 | 1,268,650 | ||||
Cost of operations - administrative services | 168,653 | 162,410 | 492,655 | 473,133 | ||||
Total operating expenses | 634,764 | 592,736 | 1,844,705 | 1,741,783 | ||||
Operating income | 106,472 | 95,103 | 294,784 | 256,263 | ||||
Investment income | ||||||||
Net investment income | 5,834 | 18,858 | 24,606 | 49,605 | ||||
Net realized and unrealized investment (losses) gains | (6,230) | 1,610 | (23,833) | 5,183 | ||||
Net impairment (losses) recoveries recognized in earnings | (175) | 130 | (429) | 216 | ||||
Total investment (loss) income | (571) | 20,598 | 344 | 55,004 | ||||
Interest expense | 115 | 1,034 | 2,009 | 3,082 | ||||
Other income (expense) | 562 | (541) | 1,372 | (1,608) | ||||
Income before income taxes | 106,348 | 114,126 | 294,491 | 306,577 | ||||
Income tax expense | 22,035 | 23,903 | 61,412 | 63,759 | ||||
Net income | $ 84,313 | $ 90,223 | $ 233,079 | $ 242,818 | ||||
Net income per share | ||||||||
Class A common stock – basic | $ 1.81 | $ 1.94 | $ 5.00 | $ 5.21 | ||||
Class A common stock – diluted | $ 1.61 | $ 1.72 | $ 4.46 | $ 4.64 | ||||
Class B common stock – basic and diluted | $ 272 | $ 291 | $ 751 | $ 782 | ||||
Weighted average shares outstanding – Basic | ||||||||
Class A common stock | 46,189,025 | 46,189,035 | 46,188,878 | 46,188,729 | ||||
Class B common stock | 2,542 | 2,542 | 2,542 | 2,542 | ||||
Weighted average shares outstanding – Diluted | ||||||||
Class A common stock | 52,296,411 | 52,305,245 | 52,297,685 | 52,307,859 | ||||
Class B common stock | 2,542 | 2,542 | 2,542 | 2,542 | ||||
Dividends declared per share | ||||||||
Class A common stock | $ 1.11 | $ 1.035 | $ 3.33 | $ 3.105 | ||||
Class B common stock | $ 166.50 | $ 155.25 | $ 499.50 | $ 465.75 | ||||
Erie Indemnity Company Statements of Financial Position (in thousands) | ||||
September 30, | December 31, | |||
(Unaudited) | ||||
Assets | ||||
Current assets: | ||||
Cash and cash equivalents | $ 97,664 | $ 183,702 | ||
Available-for-sale securities | 25,750 | 38,396 | ||
Receivables from Erie Insurance Exchange and affiliates, net | 544,353 | 479,123 | ||
Prepaid expenses and other current assets | 49,360 | 56,206 | ||
Accrued investment income | 7,352 | 6,303 | ||
Total current assets | 724,479 | 763,730 | ||
Available-for-sale securities, net | 848,937 | 907,689 | ||
Equity securities | 68,969 | 87,743 | ||
Fixed assets, net | 408,750 | 374,802 | ||
Agent loans, net | 60,673 | 58,683 | ||
Deferred income taxes, net | 20,859 | 145 | ||
Other assets | 45,085 | 49,265 | ||
Total assets | $ 2,177,752 | $ 2,242,057 | ||
Liabilities and shareholders' equity | ||||
Current liabilities: | ||||
Commissions payable | $ 310,225 | $ 270,746 | ||
Agent bonuses | 77,609 | 120,437 | ||
Accounts payable and accrued liabilities | 149,020 | 138,317 | ||
Dividends payable | 51,693 | 51,693 | ||
Contract liability | 36,786 | 34,935 | ||
Deferred executive compensation | 8,859 | 12,637 | ||
Current portion of long-term borrowings | — | 2,098 | ||
Total current liabilities | 634,192 | 630,863 | ||
Defined benefit pension plans | 131,222 | 130,383 | ||
Long-term borrowings | — | 91,734 | ||
Contract liability | 18,024 | 17,686 | ||
Deferred executive compensation | 11,441 | 14,571 | ||
Other long-term liabilities | 26,294 | 14,342 | ||
Total liabilities | 821,173 | 899,579 | ||
Shareholders' equity | 1,356,579 | 1,342,478 | ||
Total liabilities and shareholders' equity | $ 2,177,752 | $ 2,242,057 | ||
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SOURCE Erie Indemnity Company
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