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Erie Indemnity Reports Full Year and Fourth Quarter 2023 Results

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Erie Indemnity Company (ERIE) reported strong financial results for the full year and quarter ending December 31, 2023, with net income per diluted share at $8.53 for the year and $2.12 for the quarter. Operating income, management fee revenue, and investment income all showed positive growth in 2023. The company's financial performance improved significantly, with operating income before taxes increasing by 38.3% in 2023 compared to 2022. ERIE also saw growth in management fee revenue and a rise in net investment income. Despite some increased costs, the company's overall financial health appears robust.
Positive
  • Strong financial results for Erie Indemnity Company in 2023, with net income per diluted share at $8.53 for the year and $2.12 for the quarter.
  • Operating income before taxes increased by 38.3% in 2023 compared to 2022, showing significant growth.
  • Management fee revenue and net investment income also saw positive growth in 2023.
  • ERIE remains a Fortune 500 company and is rated A+ (Superior) by A.M. Best.
  • 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.

Insights

The reported increase in net income per diluted share from $5.71 to $8.53 year-over-year represents a significant growth in profitability for Erie Indemnity Company. This could be indicative of a robust operational performance and efficient cost management, which are key factors in evaluating a company's financial health. The substantial rise in operating income before taxes by 38.3% further underscores the company's expanding margins. Investors may interpret these results as a positive signal, potentially influencing the stock's performance in the market.

From an investment perspective, the growth in management fee revenue suggests an increase in policy issuance and renewal services, reflecting potentially higher customer retention and acquisition rates. However, the rise in non-commission expenses, particularly in information technology, points to increased investment in digital infrastructure, which could be a strategic move to enhance long-term competitiveness despite short-term margin pressure.

It's also noteworthy that the company has managed to reduce net impairment losses on investments, which may reflect a strategic shift in the investment portfolio or better market conditions. This, combined with an increase in net investment income, could be a sign of effective asset management.

An increase of 17% in management fee revenue from policy issuance and renewal services indicates a strong market position and growth in Erie Indemnity's core business activities. The insurance industry often relies on these fees as a stable revenue source and growth in this area can be a good indicator of customer base expansion and improved product penetration.

The report highlights a growth in direct and affiliated assumed written premium, which is a measure of the total premium collected before reinsurance costs. This growth can be a testament to the company's underwriting capabilities and market demand for its insurance products. Given the competitive nature of the insurance market, such performance differentiates Erie Indemnity and may contribute to investor confidence.

However, the increase in personnel costs, driven by higher compensation and incentive plan awards, could indicate a tightening labor market or a strategy to attract and retain talent. These costs need to be carefully managed to maintain profitability without compromising on service quality and operational efficiency.

The reported financials by Erie Indemnity Company reveal broader economic trends such as increased consumer demand for insurance products, possibly influenced by economic recovery or changes in consumer behavior. The growth in policies in force suggests a healthy consumer base which is a positive sign for the economy as a whole.

Moreover, the increase in investment income, despite limited partnership losses, could be reflective of the current investment climate and interest rate environment. The ability to generate higher investment income in such a climate could be indicative of a well-diversified investment strategy and prudent financial management.

Lastly, the reported decrease in advertising expenses leading to cost savings could be a strategic response to changing market dynamics, where digital marketing might be becoming more cost-effective compared to traditional advertising channels.

Net Income per Diluted Share was $2.12 for the Quarter and $8.53 for the Year

ERIE, Pa., Feb. 26, 2024 /PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the full year and quarter ending December 31, 2023.  Net income was $446.1 million, or $8.53 per diluted share, in 2023, compared to $298.6 million, or $5.71 per diluted share, in 2022.  Net income was $110.9 million, or $2.12 per diluted share, in the fourth quarter of 2023, compared to $65.5 million, or $1.25 per diluted share, in the fourth quarter of 2022.

4Q and Full Year 2023

(in thousands)

4Q'23

4Q'22


2023

2022


Operating income

$     127,084

$       81,430


$     520,256

$     376,214


Investment income

9,771

288


28,968

632


Interest expense and other (income), net

(3,069)

(243)


(12,712)

394


Income before income taxes

139,924

81,961


561,936

376,452


Income tax expense

28,996

16,471


115,875

77,883


Net income

$     110,928

$       65,490


$     446,061

$     298,569










     2023 Full Year Highlights     

Operating income before taxes increased $144.0 million, or 38.3 percent, in 2023 compared to 2022.

  • Management fee revenue - policy issuance and renewal services increased $354.2 million, or 17.0 percent, in 2023 compared to 2022.  
  • Management fee revenue - administrative services increased $5.3 million, or 9.2% in 2023 compared to 2022.
  • Cost of operations - policy issuance and renewal services
    • Commissions increased $169.0 million in 2023 compared to 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 $46.9 million in 2023 compared to 2022.  Underwriting and policy processing costs increased $9.4 million primarily due to policies in force growth.  Information technology costs increased $18.6 million primarily due to increased professional fees, personnel costs, and hardware and software costs.  Administrative and other expenses increased $20.0 million primarily due to an increase in personnel costs.  Personnel costs in 2023 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 premium and policies in force growth and Indemnity's higher stock price at year-end 2023 compared to 2022.
  • The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $737.1 million in 2023 and $668.3 million in 2022, but had no net impact on operating income. 

Income from investments before taxes totaled $29.0 million in 2023 compared to $0.6 million in 2022.  Net investment income was $44.6 million in 2023 compared to $28.6 million in 2022.  Net investment income included limited partnership losses of $11.3 million in 2023 compared to $10.4 million in 2022.  Net realized and unrealized losses on investments were $5.8 million in 2023 compared to $27.3 million in 2022.  Net impairment losses recognized in earnings were $9.8 million in 2023 compared to $0.7 million in 2022. 

     4Q 2023 Highlights     

Operating income before taxes increased $45.7 million, or 56.1 percent, in the fourth quarter of 2023 compared to the fourth quarter of 2022.

  • Management fee revenue - policy issuance and renewal services increased $98.0 million, or 19.5 percent, in the fourth quarter of 2023 compared to the fourth quarter of 2022. 
  • Management fee revenue - administrative services increased $1.8 million, or 12.2 percent in the fourth quarter of 2023 compared to the fourth quarter of 2022.
  • Cost of operations - policy issuance and renewal services
    • Commissions increased $53.1 million in the fourth quarter of 2023 compared to the fourth quarter of 2022 primarily driven by the growth in direct and affiliated assumed written premium.
    • Non-commission expense increased $1.2 million in the fourth quarter of 2023 compared to the fourth quarter of 2022.  Information technology costs increased $2.9 million primarily due to increased professional fees and personnel costs.  Sales and advertising costs decreased $2.4 million primarily due to decreased advertising expenses.  Customer service costs increased $0.8 million primarily due to increased bank charges and personnel costs.
  • The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $192.7 million in the fourth quarter of 2022 and $175.6 million in the fourth quarter of 2022, but had no net impact on operating income. 

Income from investments before taxes totaled $9.8 million in the fourth quarter of 2023 compared to $0.3 million in the fourth quarter of 2022.  Net investment income was $14.2 million in the fourth quarter of 2023 compared to $4.0 million in the fourth quarter of 2022.  Net investment income included limited partnership losses of $0.6 million in the fourth quarter of 2023 compared to $8.3 million in the fourth quarter of 2022.  Net realized and unrealized gains on investments were $3.4 million in the fourth quarter of 2023 compared to losses of $3.5 million in the fourth quarter of 2022.  Net impairment losses recognized in earnings were $7.8 million in the fourth quarter of 2023 compared to $0.2 million in the fourth quarter of 2022.

Webcast Information
Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on February 27, 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 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, 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
December 31,


Twelve months ended
December 31,



2023


2022


2023


2022



(Unaudited)





Operating revenue









Management fee revenue - policy issuance and renewal services


$        601,595


$        503,633


$     2,442,073


$     2,087,846

Management fee revenue - administrative services


16,693


14,877


63,669


58,323

Administrative services reimbursement revenue


192,728


175,613


737,139


668,268

Service agreement revenue


6,651


6,512


26,059


25,687

Total operating revenue


817,667


700,635


3,268,940


2,840,124










Operating expenses









Cost of operations - policy issuance and renewal services


497,855


443,592


2,011,545


1,795,642

Cost of operations - administrative services


192,728


175,613


737,139


668,268

Total operating expenses


690,583


619,205


2,748,684


2,463,910

Operating income


127,084


81,430


520,256


376,214










Investment income









Net investment income


14,212


3,979


44,572


28,585

Net realized and unrealized investment gains (losses)


3,408


(3,453)


(5,838)


(27,286)

Net impairment losses recognized in earnings


(7,849)


(238)


(9,766)


(667)

Total investment income


9,771


288


28,968


632










Interest expense





2,009

Other income


3,069


243


12,712


1,615

Income before income taxes


139,924


81,961


561,936


376,452

Income tax expense


28,996


16,471


115,875


77,883

Net income


$        110,928


$          65,490


$         446,061


$         298,569



















Earnings Per Share









Net income per share









Class A common stock – basic


$               2.38


$               1.41


$               9.58


$               6.41

Class A common stock – diluted


$               2.12


$               1.25


$               8.53


$               5.71

Class B common stock – basic and diluted


$                357


$                211


$             1,437


$                962










Weighted average shares outstanding – Basic









Class A common stock


46,189,041


46,189,028


46,188,981


46,188,916

Class B common stock


2,542


2,542


2,542


2,542










Weighted average shares outstanding – Diluted









Class A common stock


52,301,676


52,298,903


52,299,411


52,297,990

Class B common stock


2,542


2,542


2,542


2,542










Dividends declared per share









Class A common stock


$             1.275


$             1.190


$             4.845


$             4.520

Class B common stock


$          191.25


$          178.50


$           726.75


$           678.00

 

Erie Indemnity Company

Statements of Financial Position

(in thousands)




December 31, 2023


December 31, 2022

Assets





Current assets:





Cash and cash equivalents (includes restricted cash of $12,542 and $11,932, respectively)


$                     144,055


$                     142,090

Available-for-sale securities


82,017


24,267

Receivables from Erie Insurance Exchange and affiliates, net


625,338


524,937

Prepaid expenses and other current assets


69,321


79,201

Accrued investment income


9,458


8,301

Total current assets


930,189


778,796






Available-for-sale securities, net


879,224


870,394

Equity securities


84,253


72,560

Fixed assets, net


442,610


413,874

Agent loans, net


58,434


60,537

Defined benefit pension plan


34,320


0

Other assets, net


42,934


43,295

Total assets


$                 2,471,964


$                 2,239,456






Liabilities and shareholders' equity





Current liabilities:





Commissions payable


$                     353,709


$                     300,028

Agent incentive compensation


68,077


95,166

Accounts payable and accrued liabilities


175,622


165,915

Dividends payable


59,377


55,419

Contract liability


41,210


36,547

Deferred executive compensation


10,982


12,036

Total current liabilities


708,977


665,111






Defined benefit pension plans


26,260


51,224

Contract liability


19,910


17,895

Deferred executive compensation


20,936


13,724

Deferred income taxes, net


11,481


14,075

Other long-term liabilities


21,565


29,019

Total liabilities


809,129


791,048






Shareholders' equity


1,662,835


1,448,408

Total liabilities and shareholders' equity


$                 2,471,964


$                 2,239,456

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/erie-indemnity-reports-full-year-and-fourth-quarter-2023-results-302071431.html

SOURCE Erie Indemnity Company

FAQ

What was Erie Indemnity Company's net income per diluted share for the full year 2023?

Erie Indemnity Company reported a net income per diluted share of $8.53 for the full year 2023.

How did Erie Indemnity Company's operating income in 2023 compare to 2022?

Erie Indemnity Company's operating income before taxes increased by 38.3% in 2023 compared to 2022.

What is the rating of Erie Indemnity Company by A.M. Best?

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

Where is Erie Insurance Group based?

Erie Insurance Group is based in Erie, Pennsylvania.

How many policies does Erie Insurance Group have in force?

Erie Insurance Group has more than 6 million policies in force.

Erie Indemnity Co

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