Erie Indemnity Reports Third Quarter 2023 Results

About this update from Erie Indemnity Company

Net Income per Diluted Share was $2.51 for the Quarter and $6.41 for the Nine Months of 2023 ERIE, Pa. , Oct. 26, 2023 /PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE ) today announced financial results for the quarter and nine months ending September 30, 2023 . Net income was $131.0 million , or $2.51 per diluted share, in the third quarter of 2023, compared to $84.3 million , or $1.61 per diluted share, in the third quarter of 2022. Net income was $335.1 million , or $6.41 per diluted share, in the first nine months of 2023, compared to $233.1 million , or $4.46 per diluted share, in the first nine months of 2022. 3Q and Nine Months 2023 (in thousands) 3Q'23 3Q'22 2023 2022 Operating income $ 148,471 $ 106,472 $ 393,172 $ 294,784 Investment income (loss) 12,302 (571) 19,197 344 Interest expense and other (income), net (3,001) (447) (9,643) 637 Income before income taxes 163,774 106,348 422,012 294,491 Income tax expense 32,734 22,035 86,879 61,412 Net income $ 131,040 $ 84,313 $ 335,133 $ 233,079 3Q 2023 Highlights Operating income before taxes increased $42.0 million , or 39.4 percent, in the third quarter of 2023 compared to the third quarter of 2022. Management fee revenue - policy issuance and renewal services increased $97.4 million , or 17.7 percent, in the third quarter of 2023 compared to the third quarter of 2022. Management fee revenue - administrative services increased $1.5 million , or 10.2 percent, in the third quarter of 2023 compared to the third quarter of 2022. Cost of operations - policy issuance and renewal services Commissions increased $44.6 million in the third quarter of 2023 compared to the third quarter of 2022, 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 $12.7 million in the third quarter of 2023 compared to the third quarter of 2022. Underwriting and policy processing expense increased $2.8 million primarily due to increased underwriting report costs. Information technology costs increased $0.9 million primarily due to increased professional fees. Administrative and other costs increased $9.7 million primarily due to an increase in personnel costs and professional fees. Personnel costs were impacted by increased compensation including higher estimated costs for incentive plan awards, partially offset by lower pension costs due to an increase in the discount rate compared to 2022. Increases in incentive plan costs were driven by improved direct written premiums and policies in force growth and a higher company stock price at September 30, 2023 compared to September 30, 2022 . Income from investments before taxes totaled $12.3 million in the third quarter of 2023 compared to loss from investments before taxes of $0.6 million in the third quarter of 2022. Net investment income was $14.6 million in the third quarter of 2023 compared to $5.8 million in the third quarter of 2022. Net investment income included less than $0.1 million of limited partnership losses in the third quarter of 2023 compared to $4.6 million in the third quarter of 2022. Net realized and unrealized losses on investments were $2.2 million in the third quarter of 2023 compared to $6.2 million in the third quarter of 2022. Nine Months 2023 Highlights Operating income before taxes increased $98.4 million , or 33.4 percent, in the first nine months of 2023 compared to the first nine months of 2022. Management fee revenue - policy issuance and renewal services increased $256.3 million , or 16.2 percent, in the first nine months of 2023 compared to the first nine months of 2022. Management fee revenue - administrative services increased $3.5 million , or 8.1 percent, in the first nine months of 2023 compared to the first nine months of 2022. Cost of operations - policy issuance and renewal services Commissions increased $115.9 million in the first nine months of 2023 compared to the first nine months of 2022, 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 $45.7 million in first the nine months of 2023 compared to the first nine months of 2022. Underwriting and policy processing expense increased $9.1 million primarily due to increased underwriting report, personnel, and postage costs. Information technology costs increased $15.7 million primarily due to increased professional fees, hardware and software costs, and personnel costs. Administrative and other costs increased $20.3 million primarily due to an increase in personnel costs. Personnel costs were impacted by increased compensation including higher estimated costs for incentive plan awards, partially offset by lower pension costs due to an increase in the discount rate compared to 2022. Increases in incentive plan costs were driven by improved direct written premiums and policies in force growth and a higher company stock price at September 30, 2023 compared to September 30, 2022 . Income from investments before taxes totaled $19.2 million in the first nine months of 2023 compared to $0.3 million in the first nine months of 2022. Net investment income was $30.4 million in the first nine months of 2023 compared to $24.6 million in the first nine months of 2022. Net investment income included $10.7 million of limited partnership losses in the first nine months of 2023 compared to $2.2 million in the first nine months 2022. Net realized and unrealized losses on investments were $9.2 million in the first nine months of 2023 compared to $23.8 million in the first nine months of 2022. Webcast Information Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on October 27, 2023 . 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, 12th 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; 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. Erie Indemnity Company Statements of Operations (dollars in thousands, except per share data) Three months ended September 30 , Nine months ended September 30 , 2023 2022 2023 2022 (Unaudited) (Unaudited) Operating revenue Management fee revenue - policy issuance and renewal services $ 649,049 $ 551,666 $ 1,840,478 $ 1,584,213 Management fee revenue - administrative services 16,151 14,657 46,976 43,446 Administrative services reimbursement revenue 187,118 168,653 544,411 492,655 Service agreement revenue 6,620 6,260 19,408 19,175 Total operating revenue 858,938 741,236 2,451,273 2,139,489 Operating expenses Cost of operations - policy issuance and renewal services 523,349 466,111 1,513,690 1,352,050 Cost of operations - administrative services 187,118 168,653 544,411 492,655 Total operating expenses 710,467 634,764 2,058,101 1,844,705 Operating income 148,471 106,472 393,172 294,784 Investment income Net investment income 14,642 5,834 30,360 24,606 Net realized and unrealized investment losses (2,227) (6,230) (9,246) (23,833) Net impairment losses recognized in earnings (113) (175) (1,917) (429) Total investment income (loss) 12,302 (571) 19,197 344 Interest expense — 115 — 2,009 Other income 3,001 562 9,643 1,372 Income before income taxes 163,774 106,348 422,012 294,491 Income tax expense 32,734 22,035 86,879 61,412 Net income $ 131,040 $ 84,313 $ 335,133 $ 233,079 Net income per share Class A common stock – basic $ 2.81 $ 1.81 $ 7.20 $ 5.00 Class A common stock – diluted $ 2.51 $ 1.61 $ 6.41 $ 4.46 Class B common stock – basic and diluted $ 422 $ 272 $ 1,079 $ 751 Weighted average shares outstanding – Basic Class A common stock 46,189,037 46,189,025 46,188,962 46,188,878 Class B common stock 2,542 2,542 2,542 2,542 Weighted average shares outstanding – Diluted Class A common stock 52,299,369 52,296,411 52,298,655 52,297,685 Class B common stock 2,542 2,542 2,542 2,542 Dividends declared per share Class A common stock $ 1.19 $ 1.11 $ 3.57 $ 3.33 Class B common stock $ 178.50 $ 166.50 $ 535.50 $ 499.50 Erie Indemnity Company Statements of Financial Position (in thousands) September 30 ,2023 December 31 ,2022 (Unaudited) Assets Current assets: Cash and cash equivalents $ 102,873 $ 142,090 Available-for-sale securities 69,822 24,267 Receivables from Erie Insurance Exchange and affiliates, net 620,683 524,937 Prepaid expenses and other current assets 71,480 79,201 Accrued investment income 8,968 8,301 Total current assets 873,826 778,796 Available-for-sale securities, net 845,415 870,394 Equity securities 79,516 72,560 Fixed assets, net 434,975 413,874 Agent loans, net 59,544 60,537 Defined benefit pension plan 65,163 0 Other assets 36,110 43,295 Total assets $ 2,394,549 $ 2,239,456 Liabilities and shareholders' equity Current liabilities: Commissions payable $ 357,614 $ 300,028 Agent bonuses 50,252 95,166 Accounts payable and accrued liabilities 165,797 165,915 Dividends payable 55,419 55,419 Contract liability 40,831 36,547 Deferred executive compensation 11,000 12,036 Total current liabilities 680,913 665,111 Defined benefit pension plans 27,744 51,224 Contract liability 19,653 17,895 Deferred executive compensation 18,547 13,724 Deferred income taxes, net 11,045 14,075 Other long-term liabilities 24,758 29,019 Total liabilities 782,660 791,048 Shareholders' equity 1,611,889 1,448,408 Total liabilities and shareholders' equity $ 2,394,549 $ 2,239,456 View original content to download multimedia: https://www.prnewswire.com/news-releases/erie-indemnity-reports-third-quarter-2023-results-301964820.html SOURCE Erie Indemnity Company

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