Erie Indemnity Reports Third Quarter 2024 Results

Oct 31 2024 20:15 BST

Net Income per Diluted Share was $3.06 for the Quarter and $8.57 for the Nine Months of 2024

ERIE, Pa. , Oct. 31, 2024 /PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter and nine months ending September 30, 2024. Net income was $159.8 million, or $3.06 per diluted share, in the third quarter of 2024, compared to $131.0 million, or $2.51 per diluted share, in the third quarter of 2023. Net income was $448.3 million, or $8.57 per diluted share, in the first nine months of 2024, compared to $335.1 million, or $6.41 per diluted share, in the first nine months of 2023.

3Q and Nine Months 2024
(in thousands)	3Q'24	3Q'23	2024	2023
Operating income	$ 180,125	$ 148,471	$ 509,145	$ 393,172
Investment income	19,549	12,302	48,455	19,197
Other income	1,168	3,001	7,871	9,643
Income before income taxes	200,842	163,774	565,471	422,012
Income tax expense	41,012	32,734	117,186	86,879
Net income	$ 159,830	$ 131,040	$ 448,285	$ 335,133

3Q 2024 Highlights

Operating income before taxes increased $31.7 million, or 21.3 percent, in the third quarter of 2024 compared to the third quarter of 2023.

Management fee revenue - policy issuance and renewal services increased $120.1 million, or 18.5 percent, in the third quarter of 2024 compared to the third quarter of 2023.
Management fee revenue - administrative services increased $1.0 million, or 6.2 percent, in the third quarter of 2024 compared to the third quarter of 2023.
Cost of operations - policy issuance and renewal services
- Commissions increased $66.3 million in the third quarter of 2024 compared to the third 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 the profitability component.
- Non-commission expense increased $23.3 million in the third quarter of 2024 compared to the third quarter of 2023. Underwriting and policy processing expense increased $5.1 million primarily due to increased underwriting report and personnel costs. Information technology costs increased $3.6 million primarily due to an increase in hardware and software costs and personnel costs, partially offset by a decrease in professional fees. Sales and advertising expense increased $4.4 million primarily due to increased costs from community development initiatives and agent-related costs. Administrative and other costs increased $7.6 million primarily due to increased personnel costs.

Income from investments before taxes totaled $19.5 million in the third quarter of 2024 compared to $12.3 million in the third quarter of 2023. Net investment income was $17.3 million in the third quarter of 2024 compared to $14.6 million in the third quarter of 2023. Net realized and unrealized gains were $2.9 million in the third quarter of 2024 compared to losses of $2.2 million in the third quarter of 2023.

Nine Months 2024 Highlights

Operating income before taxes increased $116.0 million, or 29.5 percent, in the first nine months of 2024 compared to the first nine months of 2023.

Management fee revenue - policy issuance and renewal services increased $355.3 million, or 19.3 percent, in the first nine months of 2024 compared to the first nine months of 2023.
Management fee revenue - administrative services increased $4.2 million, or 8.9 percent, in the first nine months of 2024 compared to the first nine months of 2023.
Cost of operations - policy issuance and renewal services
- Commissions increased $202.1 million in the first nine months of 2024 compared to the first nine 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 the profitability component.
- Non-commission expense increased $41.7 million in the first nine months of 2024 compared to the first nine months of 2023. Underwriting and policy processing expense increased $13.7 million primarily due to increased underwriting report and personnel costs. Information technology costs decreased $3.9 million primarily due to a decrease in professional fees, partially offset by an increase in hardware and software costs. Sales and advertising expense increased $9.6 million primarily due to increased agent-related costs and costs from community development initiatives. Customer service costs increased $6.7 million primarily due to increased personnel costs and credit card processing fees. Administrative and other costs increased $15.6 million primarily due to increased personnel costs, professional fees and charitable contributions.

Income from investments before taxes totaled $48.5 million in the first nine months of 2024 compared to $19.2 million in the first nine months of 2023. Net investment income was $49.2 million in the first nine months of 2024 compared to $30.4 million in the first nine months of 2023. Net investment income included $0.1 million of limited partnership earnings in the first nine months of 2024 compared to losses of $10.7 million in the first nine months of 2023. Net realized and unrealized gains were $3.0 million in the first nine months of 2024 compared to losses of $9.2 million in the first nine months of 2023. Net impairment losses recognized in earnings were $3.8 million in the first nine months of 2024 compared to $1.9 million in the first nine months of 2023.

Webcast Information

Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on November 1, 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 September 30,		Nine months ended September 30,
	2024	2023	2024	2023
	(Unaudited)		(Unaudited)
Operating revenue
Management fee revenue - policy issuance and renewal services	$ 769,162	$ 649,049	$ 2,195,734	$ 1,840,478
Management fee revenue - administrative services	17,154	16,151	51,139	46,976
Administrative services reimbursement revenue	206,754	187,118	604,349	544,411
Service agreement revenue	6,816	6,620	19,803	19,408
Total operating revenue	999,886	858,938	2,871,025	2,451,273

Operating expenses
Cost of operations - policy issuance and renewal services	613,007	523,349	1,757,531	1,513,690
Cost of operations - administrative services	206,754	187,118	604,349	544,411
Total operating expenses	819,761	710,467	2,361,880	2,058,101
Operating income	180,125	148,471	509,145	393,172

Investment income
Net investment income	17,322	14,642	49,235	30,360
Net realized and unrealized investment gains (losses)	2,925	(2,227)	2,983	(9,246)
Net impairment losses recognized in earnings	(698)	(113)	(3,763)	(1,917)
Total investment income	19,549	12,302	48,455	19,197

Other income	1,168	3,001	7,871	9,643
Income before income taxes	200,842	163,774	565,471	422,012
Income tax expense	41,012	32,734	117,186	86,879
Net income	$ 159,830	$ 131,040	$ 448,285	$ 335,133

Net income per share
Class A common stock – basic	$ 3.43	$ 2.81	$ 9.63	$ 7.20
Class A common stock – diluted	$ 3.06	$ 2.51	$ 8.57	$ 6.41
Class B common stock – basic and diluted	$ 515	$ 422	$ 1,444	$ 1,079

Weighted average shares outstanding – Basic
Class A common stock	46,189,059	46,189,037	46,189,038	46,188,962
Class B common stock	2,542	2,542	2,542	2,542

Weighted average shares outstanding – Diluted
Class A common stock	52,306,514	52,299,369	52,301,001	52,298,655
Class B common stock	2,542	2,542	2,542	2,542

Dividends declared per share
Class A common stock	$ 1.275	$ 1.19	$ 3.825	$ 3.57
Class B common stock	$ 191.25	$ 178.50	$ 573.75	$ 535.50

Erie Indemnity Company Statements of Financial Position (in thousands)

	September 30, 2024	December 31, 2023
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents (includes restricted cash of $23,547 and $12,542, respectively)	$ 221,213	$ 144,055
Available-for-sale securities	48,575	82,017
Receivables from Erie Insurance Exchange and affiliates, net	736,973	625,338
Prepaid expenses and other current assets, net	80,141	69,321
Accrued investment income	10,456	9,458
Total current assets	1,097,358	930,189

Available-for-sale securities, net	1,000,282	879,224
Available-for-sale securities lent	8,135	0
Equity securities	85,346	84,253
Fixed assets, net	480,707	442,610
Agent loans, net	79,829	58,434
Defined benefit pension plan	64,172	34,320
Other assets, net	48,318	42,934
Total assets	$ 2,864,147	$ 2,471,964

Liabilities and shareholders' equity
Current liabilities:
Commissions payable	$ 426,341	$ 353,709
Agent incentive compensation	60,073	68,077
Accounts payable and accrued liabilities	194,649	175,622
Dividends payable	59,377	59,377
Contract liability	42,754	41,210
Deferred executive compensation	15,836	10,982
Securities lending payable	7,905	0
Total current liabilities	806,935	708,977

Defined benefit pension plan	27,757	26,260
Contract liability	21,220	19,910
Deferred executive compensation	24,010	20,936
Deferred income taxes, net	12,777	11,481
Other long-term liabilities	23,493	21,565
Total liabilities	916,192	809,129

Shareholders' equity	1,947,955	1,662,835
Total liabilities and shareholders' equity	$ 2,864,147	$ 2,471,964

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Erie Indemnity Reports Third Quarter 2024 Results