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Erie Indemnity Reports First Quarter 2019 Results

Net Income per Diluted Share up 14.5 percent for the Quarter

ERIE, Pa., May 2, 2019 /PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter ending March 31, 2019.  Net income was $75.3 million, or $1.44 per diluted share, in the first quarter of 2019, compared to $65.8 million, or $1.26 per diluted share, in the first quarter of 2018.

1Q 2019

(dollars in thousands)

1Q'19

1Q'18

Operating income

$

86,122


$

77,567


Investment income

9,795


6,163


Interest expense and other income, net

402


509


Income before income taxes

95,515


83,221


Income tax expense

20,204


17,463


Net income

$

75,311


$

65,758





Erie Insurance. (PRNewsFoto/Erie Insurance) (PRNewsfoto/Erie Insurance)

 

                                                                           1Q 2019 Highlights                                                                           

Operating income before taxes increased $8.6 million, or 11.0 percent, in the first quarter of 2019 compared to the first quarter of 2018, as the growth in total operating revenue outpaced the growth in total operating expenses.

  • Management fee revenue - policy issuance and renewal services increased $25.0 million, or 6.2 percent, to $431.0 million in the first quarter of 2019 compared to the first quarter of 2018.
  • Management fee revenue - administrative services increased $0.9 million, or 6.7 percent, to $14.0 million in the first quarter of 2019 compared to the first quarter of 2018.
  • Cost of operations - policy issuance and renewal services
  • The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $142.5 million in the first quarter of 2019, but had no net impact on operating income.

Income from investments before taxes totaled $9.8 million in the first quarter of 2019 compared to $6.2 million in the first quarter of 2018.  Net realized gains were $2.5 million in the first quarter of 2019 compared to net realized losses of $0.5 million in the first quarter of 2018.  Net investment income was $8.5 million in the first quarter of 2019 compared to $6.8 million in the first quarter of 2018.

Webcast Information
Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on May 3, 2019.  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 9th largest homeowners insurer and 11th 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 more than 5 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.

***

"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 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:
  • dependence upon our relationship with the Exchange and the financial condition of the Exchange, including:
  • costs of providing policy issuance and renewal services to the Exchange under the subscriber's agreement;
  • credit risk from the Exchange;
  • 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;
  • factors affecting the quality and liquidity of our investment portfolio;
  • our ability to meet liquidity needs and access capital; and
  • outcome of pending and potential litigation.

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,



2019


2018



(Unaudited)

Operating revenue





Management fee revenue - policy issuance and renewal services, net


$

430,983


$

405,978

Management fee revenue - administrative services, net


13,951


13,074

Administrative services reimbursement revenue


142,480


145,963

Service agreement revenue


6,692


7,145

Total operating revenue


594,106


572,160






Operating expenses





Cost of operations - policy issuance and renewal services


365,504


348,630

Cost of operations - administrative services


142,480


145,963

Total operating expenses


507,984


494,593

Operating income


86,122


77,567






Investment income





Net investment income


8,517


6,820

Net realized investment gains (losses)


2,503


(465)

Net impairment losses recognized in earnings


(78)


0

Equity in losses of limited partnerships


(1,147)


(192)

Total investment income


9,795


6,163






Interest expense, net


449


553

Other income


47


44

Income before income taxes


95,515


83,221

Income tax expense


20,204


17,463

Net income


$

75,311


$

65,758






Net income per share





Class A common stock – basic


$

1.62


$

1.41

Class A common stock – diluted


$

1.44


$

1.26

Class B common stock – basic and diluted


$

243


$

212






Weighted average shares outstanding – Basic





Class A common stock


46,188,337


46,187,908

Class B common stock


2,542


2,542






Weighted average shares outstanding – Diluted





Class A common stock


52,312,036


52,310,628

Class B common stock


2,542


2,542






Dividends declared per share





Class A common stock


$

0.90


$

0.84

Class B common stock


$

135.00


$

126.00

 

 

Erie Indemnity Company

Statements of Financial Position

(in thousands)




March 31,
2019


December 31,
2018



(Unaudited)



Assets





Current assets:





Cash and cash equivalents


$

312,045


$

266,417

Available-for-sale securities


139,994


402,339

Receivables from Erie Insurance Exchange and affiliates


456,135


449,873

Prepaid expenses and other current assets


49,997


36,892

Federal income taxes recoverable


0


8,162

Accrued investment income


4,220


5,263

Total current assets


962,391


1,168,946






Available-for-sale securities


534,925


346,184

Equity securities


12,410


11,853

Limited partnership investments


30,038


34,821

Fixed assets, net


144,652


130,832

Deferred income taxes, net


22,180


24,101

Other assets


92,860


61,590

Total assets


$

1,799,456


$

1,778,327






Liabilities and shareholders' equity





Current liabilities:





Commissions payable


$

253,002


$

241,573

Agent bonuses


26,129


103,462

Accounts payable and accrued liabilities


123,179


111,291

Dividends payable


41,913


41,910

Contract liability


34,116


33,854

Deferred executive compensation


10,346


13,107

Federal income taxes payable


11,946


0

Current portion of long-term borrowings


1,891


1,870

Total current liabilities


502,522


547,067






Defined benefit pension plans


123,270


116,866

Long-term borrowings


97,382


97,860

Contract liability


17,907


17,873

Deferred executive compensation


16,817


13,075

Other long-term liabilities


27,754


11,914

Total liabilities


785,652


804,655






Shareholders' equity


1,013,804


973,672

Total liabilities and shareholders' equity


$

1,799,456


$

1,778,327

 

Cision

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