Erie Indemnity Reports Second Quarter 2024 Results

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Jul 25, 2024, 16:15 ET

Net Income per Diluted Share was $3.13 for the Quarter and $5.52 for the Six Months of 2024

ERIE, Pa., July 25, 2024 /PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter and six months ending June 30, 2024. Net income was $163.9 million, or $3.13 per diluted share, in the second quarter of 2024, compared to $117.9 million, or $2.25 per diluted share, in the second quarter of 2023. Net income was $288.5 million, or $5.52 per diluted share, in the first six months of 2024, compared to $204.1 million, or $3.90 per diluted share, in the first six months of 2023.

2Q and First Half 2024
(in thousands)	2Q'24	2Q'23	1H'24	1H'23
Operating income	$ 190,208	$ 134,158	$ 329,020	$ 244,701
Investment income	13,827	11,627	28,906	6,895
Other income	3,292	3,305	6,703	6,642
Income before income taxes	207,327	149,090	364,629	258,238
Income tax expense	43,424	31,238	76,174	54,145
Net income	$ 163,903	$ 117,852	$ 288,455	$ 204,093

2Q 2024 Highlights

Operating income before taxes increased $56.1 million, or 41.8 percent, in the second quarter of 2024 compared to the second quarter of 2023.

Management fee revenue - policy issuance and renewal services increased $127.5 million, or 20.1 percent, in the second quarter of 2024 compared to the second quarter of 2023.
Management fee revenue - administrative services increased $1.4 million, or 9.0 percent, in the second quarter of 2024 compared to the second quarter of 2023.
Cost of operations - policy issuance and renewal services
- Commissions increased $68.8 million in the second quarter of 2024 compared to the second quarter of 2023, primarily driven by the growth in direct and affiliated assumed written premium and, to a lesser extent, an increase in agent incentive compensation related to profitable growth.
- Non-commission expense increased $4.1 million in the second quarter of 2024 compared to the second quarter of 2023. Underwriting and policy processing expense increased $4.2 million primarily due to increased underwriting report and personnel costs. Information technology costs decreased $3.8 million primarily due to a decrease in professional fees and personnel costs. Customer service costs increased $2.0 million primarily due to increased personnel costs and credit card processing fees.

Income from investments before taxes totaled $13.8 million in the second quarter of 2024 compared to $11.6 million in the second quarter of 2023. Net investment income was $16.0 million in the second quarter of 2024 compared to $13.5 million in the second quarter of 2023.

First Half 2024 Highlights

Operating income before taxes increased $84.3 million, or 34.5 percent, in the first six months of 2024 compared to the first six months of 2023.

Management fee revenue - policy issuance and renewal services increased $235.1 million, or 19.7 percent, in the first six months of 2024 compared to the first six months of 2023.
Management fee revenue - administrative services increased $3.2 million, or 10.3 percent, in the first six months of 2024 compared to the first six months of 2023.
Cost of operations - policy issuance and renewal services
- Commissions increased $135.8 million in the first six months of 2024 compared to the first six months of 2023, primarily driven by the growth in direct and affiliated assumed written premium and, to a lesser extent, an increase in agent incentive compensation related to profitable growth.
- Non-commission expense increased $18.4 million in the first six months of 2024 compared to the first six months of 2023. Underwriting and policy processing expense increased $8.7 million primarily due to increased underwriting report and personnel costs. Information technology costs decreased $7.5 million primarily due to a decrease in professional fees and personnel costs largely driven by an increase in capitalized labor costs related to technology initiatives. Sales and advertising expense increased $5.2 million primarily due to increased agent-related and advertising costs. Customer service costs increased $4.0 million primarily due to increased personnel costs and credit card processing fees. Administrative and other costs increased $8.0 million primarily due to increased personnel costs, charitable contributions and professional fees.

Income from investments before taxes totaled $28.9 million in the first six months of 2024 compared to $6.9 million in the first six months of 2023. Net investment income was $31.9 million in the first six months of 2024 compared to $15.7 million in the first six months of 2023. Net investment income included $0.3 million of limited partnership earnings in the first six months of 2024 compared to losses of $10.7 million in the first six months of 2023. Net realized and unrealized gains were $0.1 million in the first six months of 2024 compared to losses of $7.0 million in the first six months of 2023.

Webcast Information

Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on July 26, 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 12^th largest homeowners insurer, 13^th largest automobile insurer and 13^th 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 17^th 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 7 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 June 30,		Six months ended June 30,
	2024	2023	2024	2023
	(Unaudited)		(Unaudited)
Operating revenue
Management fee revenue - policy issuance and renewal services	$ 760,886	$ 633,339	$ 1,426,572	$ 1,191,429
Management fee revenue - administrative services	17,051	15,636	33,985	30,825
Administrative services reimbursement revenue	206,028	184,466	397,595	357,293
Service agreement revenue	6,473	6,429	12,987	12,788
Total operating revenue	990,438	839,870	1,871,139	1,592,335

Operating expenses
Cost of operations - policy issuance and renewal services	594,202	521,246	1,144,524	990,341
Cost of operations - administrative services	206,028	184,466	397,595	357,293
Total operating expenses	800,230	705,712	1,542,119	1,347,634
Operating income	190,208	134,158	329,020	244,701

Investment income
Net investment income	16,010	13,535	31,913	15,718
Net realized and unrealized investment (losses) gains	(1,795)	(1,737)	58	(7,019)
Net impairment losses recognized in earnings	(388)	(171)	(3,065)	(1,804)
Total investment income	13,827	11,627	28,906	6,895

Other income	3,292	3,305	6,703	6,642
Income before income taxes	207,327	149,090	364,629	258,238
Income tax expense	43,424	31,238	76,174	54,145
Net income	$ 163,903	$ 117,852	$ 288,455	$ 204,093

Net income per share
Class A common stock – basic	$ 3.52	$ 2.53	$ 6.19	$ 4.38
Class A common stock – diluted	$ 3.13	$ 2.25	$ 5.52	$ 3.90
Class B common stock – basic and diluted	$ 528	$ 380	$ 929	$ 657

Weighted average shares outstanding – Basic
Class A common stock	46,189,042	46,189,026	46,189,028	46,188,923
Class B common stock	2,542	2,542	2,542	2,542

Weighted average shares outstanding – Diluted
Class A common stock	52,305,299	52,299,974	52,303,551	52,298,298
Class B common stock	2,542	2,542	2,542	2,542

Dividends declared per share
Class A common stock	$ 1.275	$ 1.19	$ 2.55	$ 2.38
Class B common stock	$ 191.25	$ 178.50	$ 382.50	$ 357.00

Erie Indemnity Company Statements of Financial Position (in thousands)

	June 30, 2024	December 31, 2023
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents (includes restricted cash of $14,027 and $12,542, respectively)	$ 170,634	$ 144,055
Available-for-sale securities	47,734	82,017
Receivables from Erie Insurance Exchange and affiliates, net	708,171	625,338
Prepaid expenses and other current assets	83,529	69,321
Accrued investment income	10,204	9,458
Total current assets	1,020,272	930,189

Available-for-sale securities, net	946,525	879,224
Available-for-sale securities lent	6,125	0
Equity securities	80,128	84,253
Fixed assets, net	469,145	442,610
Agent loans, net	56,813	58,434
Defined benefit pension plan	65,221	34,320
Other assets, net	47,731	42,934
Total assets	$ 2,691,960	$ 2,471,964

Liabilities and shareholders' equity
Current liabilities:
Commissions payable	$ 413,205	$ 353,709
Agent incentive compensation	44,870	68,077
Accounts payable and accrued liabilities	198,689	175,622
Dividends payable	59,377	59,377
Contract liability	41,570	41,210
Deferred executive compensation	8,216	10,982
Securities lending payable	6,345	0
Total current liabilities	772,272	708,977

Defined benefit pension plan	26,591	26,260
Contract liability	20,645	19,910
Deferred executive compensation	16,341	20,936
Deferred income taxes, net	5,192	11,481
Other long-term liabilities	22,106	21,565
Total liabilities	863,147	809,129

Shareholders' equity	1,828,813	1,662,835
Total liabilities and shareholders' equity	$ 2,691,960	$ 2,471,964