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Erie Indemnity Reports First Quarter 2021 Results

Published: 2021-04-29 20:15:00 ET

Net Income per Diluted Share up 24 percent for the Quarter

ERIE, Pa., April 29, 2021 /PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter ending March 31, 2021. Net income was $73.6 million, or $1.41 per diluted share, in the first quarter of 2021, compared to $59.3 million, or $1.13 per diluted share, in the first quarter of 2020.

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

1Q 2021
(in thousands)	1Q'21		1Q'20
Operating income	$	76,095	$	85,691
Investment income (loss)	17,988		(9,195)
Interest and other expense, net	1,528		369
Income before income taxes	92,555		76,127
Income tax expense	18,989		16,801
Net income	$	73,566	$	59,326

1Q 2021 Highlights

Operating income before taxes decreased $9.6 million, or 11.2 percent, in the first quarter of 2021 compared to the first quarter of 2020.

Management fee revenue - policy issuance and renewal services increased $12.0 million, or 2.7 percent, in the first quarter of 2021 compared to the first quarter of 2020.
Management fee revenue - administrative services increased $0.1 million, or 0.5 percent, in the first quarter of 2021 compared to the first quarter of 2020.
Cost of operations - policy issuance and renewal services

Commissions increased $9.4 million in the first quarter of 2021 compared to the first quarter of 2020, driven by the growth in direct and affiliated assumed written premium, primarily in lines of business that pay a higher commission rate. To a lesser extent, there was also an increase in agent incentive compensation for the first quarter of 2021 compared to the first quarter of 2020.
Non-commission expense increased $11.7 million in the first quarter of 2021 compared to the first quarter of 2020. Underwriting and policy processing expense decreased $0.8 million primarily due to lower personnel costs. Information technology costs increased $4.2 million primarily due to increased hardware and software costs and professional fees. Administrative and other costs increased $8.5 million primarily driven by increased professional fees and higher incentive plan award accruals due to improved performance in the first quarter of 2021 compared to the same period in 2020.

Income from investments before taxes totaled $18.0 million in the first quarter of 2021 compared to a loss from investments of $9.2 million in the first quarter of 2020. Net investment income was $17.1 million in the first quarter of 2021 compared to $4.7 million in the first quarter of 2020. Included in net investment income is $9.0 million of limited partnership earnings in the first quarter of 2021 and $3.7 million of limited partnership losses in the first quarter of 2020. Net realized gains on investments were $0.8 million in the first quarter of 2021 compared to net realized losses of $10.8 million in the first quarter of 2020. Investment losses experienced during the first quarter of 2020 were primarily due to the significant financial market volatility resulting from the COVID-19 pandemic.

Webcast InformationIndemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on April 30, 2021. Investors may access the pre-recorded audio broadcast by logging on to www.erieinsurance.com.

Erie Insurance GroupAccording to A.M. Best Company, Erie Insurance Group, based in Erie, Pennsylvania, is the 11th largest homeowners insurer and 12th largest automobile insurer in the United States based on direct premiums written and the 16th largest property/casualty insurer in the United States based on total lines net premium written. The Group, rated A+ (Superior) by A.M. Best Company, has nearly 6 million policies in force and operates in 12 states and the District of Columbia. Erie Insurance Group is a FORTUNE 500 company.

News releases and more information about Erie Insurance Group are available at www.erieinsurance.com.

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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 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;
emerging claims and coverage issues in the industry; and
severe weather conditions or other catastrophic losses, including terrorism;

potential impacts of the COVID-19 pandemic on the growth and financial condition of the Exchange;
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;
potential impacts of the COVID-19 pandemic on our operations, the business operations of our customers and/or independent agents, or our third-party vendor operations;
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 March 31,
	2021		2020
	(Unaudited)
Operating revenue
Management fee revenue - policy issuance and renewal services, net	$	455,718	$	443,750
Management fee revenue - administrative services, net	14,847		14,771
Administrative services reimbursement revenue	153,533		151,554
Service agreement revenue	6,079		6,662
Total operating revenue	630,177		616,737

Operating expenses
Cost of operations - policy issuance and renewal services	400,549		379,492
Cost of operations - administrative services	153,533		151,554
Total operating expenses	554,082		531,046
Operating income	76,095		85,691

Investment income
Net investment income	17,097		4,664
Net realized investment gains (losses)	804		(10,806)
Net impairment recoveries (losses) recognized in earnings	87		(3,053)
Total investment income (loss)	17,988		(9,195)

Interest expense, net	1,009		3
Other expense	519		366
Income before income taxes	92,555		76,127
Income tax expense	18,989		16,801
Net income	$	73,566	$	59,326

Net income per share
Class A common stock – basic	$	1.58	$	1.27
Class A common stock – diluted	$	1.41	$	1.13
Class B common stock – basic and diluted	$	237	$	191

Weighted average shares outstanding – Basic
Class A common stock	46,188,860		46,188,789
Class B common stock	2,542		2,542

Weighted average shares outstanding – Diluted
Class A common stock	52,315,958		52,324,350
Class B common stock	2,542		2,542

Dividends declared per share
Class A common stock	$	1.035	$	0.965
Class B common stock	$	155.25	$	144.75

Erie Indemnity Company Statements of Financial Position (in thousands)

	March 31, 2021		December 31, 2020
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	135,192	$	161,240
Available-for-sale securities	16,847		17,697
Equity securities	146		19
Receivables from Erie Insurance Exchange and affiliates, net	481,481		494,637
Prepaid expenses and other current assets	62,401		52,561
Accrued investment income	5,860		6,146
Total current assets	701,927		732,300

Available-for-sale securities, net	901,475		910,539
Equity securities	92,785		94,071
Fixed assets, net	282,268		265,341
Agent loans, net	59,916		62,449
Deferred income taxes, net	16,454		12,341
Other assets	44,273		40,081
Total assets	$	2,099,098	$	2,117,122

Liabilities and shareholders' equity
Current liabilities:
Commissions payable	$	272,670	$	262,338
Agent bonuses	30,766		110,158
Accounts payable and accrued liabilities	168,127		150,706
Dividends payable	48,200		48,200
Contract liability	35,799		36,917
Deferred executive compensation	13,825		17,319
Current portion of long-term borrowings	2,053		2,031
Total current liabilities	571,440		627,669

Defined benefit pension plans	174,228		164,346
Long-term borrowings	93,311		93,833
Contract liability	18,276		18,878
Deferred executive compensation	16,648		14,904
Other long-term liabilities	17,062		9,444
Total liabilities	890,965		929,074

Shareholders' equity	1,208,133		1,188,048
Total liabilities and shareholders' equity	$	2,099,098	$	2,117,122

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SOURCE Erie Indemnity Company

Enhanced Investments, Inc.
329 South Oyster Bay Road #2085
Plainview, NY 11803
team@eninvs.com

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All statements made via social media sites sponsored or maintained by Enhanced Investments and its affiliates are for informational purposes only and do not constitute a comprehensive description of Enhanced Investments' investment advisory services.
Certain investments are not suitable for all investors. Before investing, consider your investment objectives and applicable fees. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested. Information provided by Enhanced Investments is for informational and general educational purposes only and is not investment or financial advice.