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Erie Indemnity Reports Second Quarter 2019 Results

Net Income per Diluted Share up 10.1 percent for the Quarter and 12.1 percent for the First Half of 2019

ERIE, Pa., July 25, 2019 /PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter and six months ending June 30, 2019.  Net income was $87.8 million, or $1.68 per diluted share, in the second quarter of 2019, compared to $79.7 million, or $1.52 per diluted share, in the second quarter of 2018.  Net income was $163.1 million, or $3.12 per diluted share, in the first six months of 2019, compared to $145.5 million, or $2.78 per diluted share, in the first six months of 2018.

2Q and First Half 2019

(in thousands)

2Q'19

2Q'18


1H'19

1H'18


Operating income

$

96,610


$

95,323



$

182,732


$

172,890



Investment income

9,652


6,207



19,447


12,370



Interest expense and other income, net

224


544



626


1,053



Income before income taxes

106,038


100,986



201,553


184,207



Income tax expense

18,284


21,280



38,488


38,743



Net income

$

87,754


$

79,706



$

163,065


$

145,464










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

 

                                                                          2Q 2019 Highlights                                                                           

Operating income before taxes increased $1.3 million, or 1.3 percent, in the second quarter of 2019 compared to the second quarter of 2018.

  • Management fee revenue - policy issuance and renewal services increased $25.9 million, or 5.7 percent, in the second quarter of 2019 compared to the second quarter of 2018.
  • Management fee revenue - administrative services increased $0.9 million, or 6.7 percent, in the second quarter of 2019 compared to the second 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 $146.1 million in the second quarter of 2019, but had no net impact on operating income.

Income from investments before taxes totaled $9.7 million in the second quarter of 2019 compared to $6.2 million in the second quarter of 2018.  Net realized gains increased $1.3 million in the second quarter of 2019 compared to the second quarter of 2018.  Net investment income was $8.0 million in the second quarter of 2019 compared to $7.1 million in the second quarter of 2018.  Earnings from limited partnerships were $0.4 million in the second quarter of 2019 compared to losses of $0.2 million in the second quarter of 2018.

                                                                   First Half 2019 Highlights                                                                       

Operating income before taxes increased $9.8 million, or 5.7 percent, in the first six months of 2019 compared to the first six months of 2018.

  • Management fee revenue - policy issuance and renewal services increased $50.9 million, or 5.9 percent, in the first six months of 2019 compared to the first six months of 2018.
  • Management fee revenue allocated to administrative services increased $1.8 million, or 6.7 percent, in the first six months of 2019 compared to the first six months 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 $288.6 million in the first six months of 2019, but had no net impact on operating income.

Income from investments before taxes totaled $19.4 million in the first six months of 2019 compared to $12.4 million in the first six months of 2018.  Net realized gains on investments were $3.8 million in the first six months of 2019 compared to net realized losses of $0.5 million in the first six months of 2018.  Net investment income was $16.5 million in the first six months of 2019 compared to $13.9 million in the first six months of 2018, while losses on limited partnerships were $0.7 million in the first six months of 2019 compared to $0.4 million in the first six months of 2018.

Webcast Information
Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on July 26, 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 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 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 June 30,


Six months ended June 30,



2019


2018


2019


2018



(Unaudited)


(Unaudited)

Operating revenue









Management fee revenue - policy issuance and renewal services, net


$

480,513



$

454,572



$

911,496



$

860,550


Management fee revenue - administrative services, net


14,195



13,299



28,146



26,373


Administrative services reimbursement revenue


146,095



146,507



288,575



292,470


Service agreement revenue


6,907



7,080



13,599



14,225


Total operating revenue


647,710



621,458



1,241,816



1,193,618











Operating expenses









Cost of operations - policy issuance and renewal services


405,005



379,628



770,509



728,258


Cost of operations - administrative services


146,095



146,507



288,575



292,470


Total operating expenses


551,100



526,135



1,059,084



1,020,728


Operating income


96,610



95,323



182,732



172,890











Investment income









Net investment income


8,030



7,104



16,547



13,924


Net realized investment gains (losses)


1,302



(32)



3,805



(497)


Net impairment losses recognized in earnings


(84)



(646)



(162)



(646)


Equity in earnings (losses) of limited partnerships


404



(219)



(743)



(411)


Total investment income


9,652



6,207



19,447



12,370











Interest expense, net


272



602



721



1,155


Other income


48



58



95



102


Income before income taxes


106,038



100,986



201,553



184,207


Income tax expense


18,284



21,280



38,488



38,743


Net income


$

87,754



$

79,706



$

163,065



$

145,464











Net income per share









Class A common stock – basic


$

1.88



$

1.71



$

3.50



$

3.12


Class A common stock – diluted


$

1.68



$

1.52



$

3.12



$

2.78


Class B common stock – basic


$

283



$

257



$

525



$

469


Class B common stock – diluted


$

283



$

257



$

525



$

468











Weighted average shares outstanding – Basic









Class A common stock


46,188,994



46,188,705



46,188,668



46,188,309


Class B common stock


2,542



2,542



2,542



2,542











Weighted average shares outstanding – Diluted









Class A common stock


52,314,700



52,312,849



52,313,371



52,311,741


Class B common stock


2,542



2,542



2,542



2,542











Dividends declared per share









Class A common stock


$

0.90



$

0.84



$

1.80



$

1.68


Class B common stock


$

135.00



$

126.00



$

270.00



$

252.00



 

Erie Indemnity Company

Statements of Financial Position

(in thousands)




June 30, 2019


December 31, 2018



(Unaudited)



Assets





Current assets:





Cash and cash equivalents


$

338,262



$

266,417


Available-for-sale securities


61,210



402,339


Receivables from Erie Insurance Exchange and affiliates


483,319



449,873


Prepaid expenses and other current assets


42,300



36,892


Federal income taxes recoverable


7,791



8,162


Accrued investment income


4,365



5,263


Total current assets


937,247



1,168,946







Available-for-sale securities


627,898



346,184


Equity securities


12,445



11,853


Limited partnership investments


30,344



34,821


Fixed assets, net


173,055



130,832


Deferred income taxes, net


19,090



24,101


Other assets


89,568



61,590


Total assets


$

1,889,647



$

1,778,327







Liabilities and shareholders' equity





Current liabilities:





Commissions payable


$

267,403



$

241,573


Agent bonuses


51,357



103,462


Accounts payable and accrued liabilities


124,794



111,291


Dividends payable


41,913



41,910


Contract liability


35,374



33,854


Deferred executive compensation


12,605



13,107


Current portion of long-term borrowings


1,914



1,870


Total current liabilities


535,360



547,067







Defined benefit pension plans


129,674



116,866


Long-term borrowings


96,860



97,860


Contract liability


18,339



17,873


Deferred executive compensation


13,199



13,075


Other long-term liabilities


32,761



11,914


Total liabilities


826,193



804,655







Shareholders' equity


1,063,454



973,672


Total liabilities and shareholders' equity


$

1,889,647



$

1,778,327



 

Cision

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