Erie Indemnity Reports First Quarter 2024 Results

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Erie Indemnity Company reported strong financial results for the first quarter of 2024, with a net income of $124.6 million and earnings per diluted share of $2.38. Operating income increased by 25.6%, while management fee revenue saw significant growth. The company's investment income improved, leading to a positive quarter compared to the same period in 2023.

Positive

• Operating income increased by 25.6% in the first quarter of 2024 compared to the same period in 2023.
• Management fee revenue for policy issuance and renewal services increased by 19.3% in the first quarter of 2024.
• Investment income improved, with net investment income reaching $15.9 million in the first quarter of 2024.
• Erie Insurance Group 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.

Negative

• None.

Financial Analyst

Erie Indemnity's Q1 2024 results exhibit a notable increase in net income, jumping to $124.6 million from $86.2 million year-over-year. A sharp rise of 25.6% in operating income before taxes is a clear indicator of operational efficiency. The substantial 19.3% surge in management fee revenue reflects the company's growing policy issuance and renewal services, a vital stream of recurrent revenue. However, careful attention to the 11.5% increase in administrative services revenue is crucial, as it may signal scaling operations. The dynamic shifts in investment income—turning from a loss to a gain of $15.1 million—and the shift from limited partnership losses to earnings showcase a notable improvement in investment strategy or favorable market conditions. These factors, combined with a healthy underwriting process indicated by increased commissions and policy processing costs, bode well for stock stability and potential investor confidence.

Insurance Industry Analyst

Key metrics such as the growth in direct and affiliated assumed written premium, alongside increased agent incentive compensation, hint at Erie's proactive market engagement and competitive positioning within the insurance sector. The company's management adeptly contained information technology costs, possibly through strategic outsourcing or capitalizing on in-house technology developments. In contrast, increased personnel and travel expenses may reflect a post-pandemic normalization of business operations. It's also important to note Erie's A.M. Best A+ rating, which reinforces its reliability and potential attractiveness to new policyholders. With its solid positioning as a top insurer based on direct premiums written, Erie's operational growth could indicate a potential upside for long-term investors, provided it sustains its profitability and effectively manages operational costs.

Net Income was $124.6 million, Earnings per Diluted Share was $2.38

ERIE, Pa., April 25, 2024 /PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter ending March 31, 2024. Net income was $124.6 million, or $2.38 per diluted share, in the first quarter of 2024, compared to $86.2 million, or $1.65 per diluted share, in the first quarter of 2023.

1Q 2024
(in thousands)	1Q'24	1Q'23
Operating income	$      138,812	$      110,543
Investment income (loss)	15,079	(4,732)
Other income	3,411	3,337
Income before income taxes	157,302	109,148
Income tax expense	32,750	22,907
Net income	$      124,552	$        86,241

 

1Q 2024 Highlights

Operating income before taxes increased $28.3 million, or 25.6 percent, in the first quarter of 2024 compared to the first quarter of 2023.

• Management fee revenue - policy issuance and renewal services increased $107.6 million, or 19.3 percent, in the first quarter of 2024 compared to the first quarter of 2023.
• Management fee revenue - administrative services increased $1.7 million, or 11.5 percent, in the first quarter of 2024 compared to the first quarter of 2023.
• Cost of operations - policy issuance and renewal services
  • Commissions increased $67.0 million in the first quarter of 2024 compared to the first quarter of 2023, primarily driven by the growth in direct and affiliated assumed written premium and an increase in agent incentive compensation. 
  • Non-commission expense increased $14.3 million in the first quarter of 2024 compared to the first quarter of 2023. Underwriting and policy processing expense increased $4.4 million primarily due to increased underwriting report and personnel costs. Information technology costs decreased $3.7 million primarily due to an increase in capitalized professional fees and personnel costs related to technology initiatives. Sales and advertising expense increased $4.3 million primarily due to increased agent-related costs. Administrative and other costs increased $7.2 million primarily due to an increase in personnel and travel costs.

Income from investments before taxes totaled $15.1 million in the first quarter of 2024 compared to loss from investments before taxes of $4.7 million in the first quarter of 2023. Net investment income was $15.9 million in the first quarter of 2024 compared to $2.2 million in the first quarter of 2023. Net investment income included $0.5 million of limited partnership earnings in the first quarter of 2024 compared to losses of $10.8 million in the first quarter of 2023. Net realized and unrealized gains on investments were $1.9 million in the first quarter of 2024 compared to losses of $5.3 million in the first quarter of 2023. Net impairment losses recognized in earnings were $2.7 million in the first quarter of 2024 compared to $1.6 million in the first quarter of 2023.

Webcast Information

Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on April 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, 12^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 19^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 nearly 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 March 31,
		2024		2023
		(Unaudited)
Operating revenue
Management fee revenue - policy issuance and renewal services		$         665,686		$         558,090
Management fee revenue - administrative services		16,934		15,189
Administrative services reimbursement revenue		191,567		172,827
Service agreement revenue		6,514		6,359
Total operating revenue		880,701		752,465
Operating expenses
Cost of operations - policy issuance and renewal services		550,322		469,095
Cost of operations - administrative services		191,567		172,827
Total operating expenses		741,889		641,922
Operating income		138,812		110,543
Investment income
Net investment income		15,903		2,183
Net realized and unrealized investment gains (losses)		1,853		(5,282)
Net impairment losses recognized in earnings		(2,677)		(1,633)
Total investment income (loss)		15,079		(4,732)
Other income		3,411		3,337
Income before income taxes		157,302		109,148
Income tax expense		32,750		22,907
Net income		$         124,552		$           86,241
Net income per share
Class A common stock – basic		$               2.67		$               1.85
Class A common stock – diluted		$               2.38		$               1.65
Class B common stock – basic and diluted		$                401		$                278
Weighted average shares outstanding – Basic
Class A common stock		46,189,014		46,188,819
Class B common stock		2,542		2,542
Weighted average shares outstanding – Diluted
Class A common stock		52,301,803		52,296,621
Class B common stock		2,542		2,542
Dividends declared per share
Class A common stock		$             1.275		$             1.190
Class B common stock		$           191.25		$           178.50

 

Erie Indemnity Company Statements of Financial Position (in thousands)
		March 31, 2024		December 31, 2023
		(Unaudited)
Assets
Current assets:
Cash and cash equivalents (includes restricted cash of $13,331 and $12,542, respectively)		$         144,872		$         144,055
Available-for-sale securities		76,693		82,017
Receivables from Erie Insurance Exchange and affiliates, net		641,691		625,338
Prepaid expenses and other current assets		69,050		69,321
Accrued investment income		9,465		9,458
Total current assets		941,771		930,189
Available-for-sale securities, net		892,952		879,224
Equity securities		86,578		84,253
Fixed assets, net		461,914		442,610
Agent loans, net		57,470		58,434
Defined benefit pension plan		66,270		34,320
Other assets, net		48,839		42,934
Total assets		$     2,555,794		$     2,471,964
Liabilities and shareholders' equity
Current liabilities:
Commissions payable		$         384,613		$         353,709
Agent incentive compensation		26,968		68,077
Accounts payable and accrued liabilities		213,062		175,622
Dividends payable		59,377		59,377
Contract liability		40,555		41,210
Deferred executive compensation		2,941		10,982
Total current liabilities		727,516		708,977
Defined benefit pension plan		23,792		26,260
Contract liability		20,000		19,910
Deferred executive compensation		23,216		20,936
Deferred income taxes, net		6,593		11,481
Other long-term liabilities		28,497		21,565
Total liabilities		829,614		809,129
Shareholders' equity		1,726,180		1,662,835
Total liabilities and shareholders' equity		$     2,555,794		$     2,471,964

 

 

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SOURCE Erie Indemnity Company

FAQ

What was Erie Indemnity Company's net income for the first quarter of 2024?

Erie Indemnity Company reported a net income of $124.6 million for the first quarter of 2024.

What was the earnings per diluted share for Erie Indemnity Company in the first quarter of 2024?

Erie Indemnity Company reported earnings per diluted share of $2.38 for the first quarter of 2024.

How did Erie Indemnity Company's operating income change in the first quarter of 2024 compared to the same period in 2023?

Erie Indemnity Company's operating income increased by 25.6% in the first quarter of 2024 compared to the same period in 2023.

Where is Erie Insurance Group based?

Erie Insurance Group is based in Erie, Pennsylvania.

What is Erie Insurance Group's rating by A.M. Best Company?

Erie Insurance Group is rated A+ (Superior) by A.M. Best Company.