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Erie Indemnity Reports Third Quarter 2023 Results

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Erie Indemnity Company (NASDAQ: ERIE) announced financial results for Q3 and nine months of 2023. Net income per diluted share was $2.51 for the quarter and $6.41 for the nine months of 2023, compared to $1.61 and $4.46 in the same periods of 2022. Operating income before taxes increased by 39.4% in Q3 2023 compared to Q3 2022.
Positive
  • Net income per diluted share increased by 55.3% in Q3 2023 compared to Q3 2022
  • Operating income before taxes increased by 39.4% in Q3 2023 compared to Q3 2022
Negative
  • None.

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

 

Cision 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

FAQ

What was the net income per diluted share for Q3 2023?

The net income per diluted share for Q3 2023 was $2.51.

How much did the operating income before taxes increase in Q3 2023?

The operating income before taxes increased by 39.4% in Q3 2023 compared to Q3 2022.

Erie Indemnity Co

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