Erie Indemnity Reports First Quarter 2022 Results

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Apr 28, 2022, 16:15 ET

Net Income was $68.6 million, Earnings per Diluted Share was $1.31

ERIE, Pa., April 28, 2022 /PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter ending March 31, 2022. Net income was $68.6 million, or $1.31 per diluted share, in the first quarter of 2022, compared to $73.6 million, or $1.41 per diluted share, in the first quarter of 2021.

1Q 2022
(in thousands)	1Q'22	1Q'21
Operating income	$ 84,312	$ 76,095
Investment income	3,009	17,988
Interest expense and other, net	526	1,528
Income before income taxes	86,795	92,555
Income tax expense	18,176	18,989
Net income	$ 68,619	$ 73,566


1Q 2022 Highlights

Operating income before taxes increased $8.2 million, or 10.8 percent, in the first quarter of 2022 compared to the first quarter of 2021.

Management fee revenue - policy issuance and renewal services increased $32.3 million, or 7.1 percent, in the first quarter of 2022 compared to the first quarter of 2021.
Management fee revenue - administrative services decreased $0.5 million, or 3.6 percent, in the first quarter of 2022 compared to the first quarter of 2021.
Cost of operations - policy issuance and renewal services

Commissions increased $19.8 million in the first quarter of 2022 compared to the first quarter of 2021, primarily driven by the growth in direct and affiliated assumed written premium, primarily in lines of business that pay a higher commission rate.
Non-commission expense increased $4.2 million in the first quarter of 2022 compared to the first quarter of 2021. Sales and advertising increased $1.8 million primarily due to agent related expenses. Administrative and other costs increased $3.1 million primarily due to an increase in professional fees compared to the same period in 2021.

Income from investments before taxes totaled $3.0 million in the first quarter of 2022 compared to $18.0 million in the first quarter of 2021. Net investment income was $10.5 million in the first quarter of 2022 compared to $17.1 million in the first quarter of 2021. Included in net investment income is $2.8 million of limited partnership earnings in the first quarter of 2022 compared to $9.0 million in the first quarter of 2021. Net realized and unrealized losses on investments were $7.3 million in the first quarter of 2022 compared to net realized and unrealized gains of $0.8 million in the first quarter of 2021.

Webcast Information
Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on April 29, 2022. 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, 13^th 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 16th 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.

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"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 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;
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 March 31,
	2022	2021
	(Unaudited)
Operating revenue
Management fee revenue - policy issuance and renewal services	$ 487,992	$ 455,718
Management fee revenue - administrative services	14,313	14,847
Administrative services reimbursement revenue	163,327	153,533
Service agreement revenue	6,478	6,079
Total operating revenue	672,110	630,177

Operating expenses
Cost of operations - policy issuance and renewal services	424,471	400,549
Cost of operations - administrative services	163,327	153,533
Total operating expenses	587,798	554,082
Operating income	84,312	76,095

Investment income
Net investment income	10,504	17,097
Net realized and unrealized investment (losses) gains	(7,279)	804
Net impairment (losses) recoveries recognized in earnings	(216)	87
Total investment income	3,009	17,988

Interest expense	999	1,009
Other income (expense)	473	(519)
Income before income taxes	86,795	92,555
Income tax expense	18,176	18,989
Net income	$ 68,619	$ 73,566

Net income per share
Class A common stock – basic	$ 1.47	$ 1.58
Class A common stock – diluted	$ 1.31	$ 1.41
Class B common stock – basic and diluted	$ 221	$ 237

Weighted average shares outstanding – Basic
Class A common stock	46,188,761	46,188,860
Class B common stock	2,542	2,542

Weighted average shares outstanding – Diluted
Class A common stock	52,300,501	52,315,958
Class B common stock	2,542	2,542

Dividends declared per share
Class A common stock	$ 1.110	$ 1.035
Class B common stock	$ 166.50	$ 155.25

Erie Indemnity Company Statements of Financial Position (in thousands)

	March 31, 2022	December 31, 2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$ 141,305	$ 183,702
Available-for-sale securities	46,155	38,396
Receivables from Erie Insurance Exchange and affiliates, net	478,754	479,123
Prepaid expenses and other current assets	78,877	56,206
Accrued investment income	6,255	6,303
Total current assets	751,346	763,730

Available-for-sale securities, net	877,165	907,689
Equity securities	78,069	87,743
Fixed assets, net	396,072	374,802
Agent loans, net	61,579	58,683
Deferred income taxes, net	9,818	145
Other assets	49,804	49,265
Total assets	$ 2,223,853	$ 2,242,057

Liabilities and shareholders' equity
Current liabilities:
Commissions payable	$ 287,989	$ 270,746
Agent bonuses	31,507	120,437
Accounts payable and accrued liabilities	186,386	138,317
Dividends payable	51,693	51,693
Contract liability	34,872	34,935
Deferred executive compensation	6,752	12,637
Current portion of long-term borrowings	2,132	2,098
Total current liabilities	601,331	630,863

Defined benefit pension plans	139,231	130,383
Long-term borrowings	91,177	91,734
Contract liability	17,493	17,686
Deferred executive compensation	13,821	14,571
Other long-term liabilities	26,600	14,342
Total liabilities	889,653	899,579

Shareholders' equity	1,334,200	1,342,478
Total liabilities and shareholders' equity	$ 2,223,853	$ 2,242,057