ERIE INDEMNITY CO.
ERIE INDEMNITY CO.
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Erie Indemnity Reports Full Year and Fourth Quarter 2021 Results

  • 24
Erie Indemnity Reports Full Year and Fourth Quarter 2021 Results
Net Income per Diluted Share was $1.05 for the Quarter and $5.69 for the Year

PR Newswire

ERIE, Pa., Feb. 24, 2022 /PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the full year and quarter ending December 31, 2021.  Net income was $297.9 million, or $5.69 per diluted share, in 2021, compared to $293.3 million, or $5.61 per diluted share, in 2020.  Net income was $55.0 million, or $1.05 per diluted share, in the fourth quarter of 2021, compared to $62.8 million, or $1.20 per diluted share, in the fourth quarter of 2020.

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

The uncertainty resulting from COVID-19 and subsequent resulting conditions continues to evolve and the ultimate impact and duration remain uncertain at this time.

4Q and Full Year 2021

(dollars in thousands)

4Q'21

4Q'20


2021

2020


Operating income

$        61,834

$        65,052


$      318,097

$      338,157


Investment income

12,328

14,071


67,332

32,867


Interest and other expense, net

4,335

913


9,025

2,509


Income before income taxes

69,827

78,210


376,404

368,515


Income tax expense

14,785

15,425


78,544

75,211


Net income

$        55,042

$        62,785


$      297,860

$      293,304




















2021 Full Year Highlights

Operating income before taxes decreased $20.1 million, or 5.9 percent, in 2021 compared to 2020.

  • Management fee revenue - policy issuance and renewal services increased $71.4 million, or 3.9 percent, in 2021 compared to 2020.
  • Management fee revenue allocated to administrative services decreased $1.2 million, or 2.0 percent, in 2021 compared to 2020.
  • Cost of operations - policy issuance and renewal services
    • Commissions increased $57.2 million in 2021 compared to 2020 resulting from higher direct and affiliated assumed premiums written by the Exchange and higher agent incentive compensation.
    • Non-commission expense increased $31.3 million in 2021 compared to 2020. Underwriting and policy processing costs increased $4.5 million primarily due to increased personnel costs and underwriting report costs. Information technology costs increased $11.3 million primarily due to increased hardware and software costs and personnel costs. Administrative and other expenses increased $14.2 million primarily driven by increased professional fees and building and equipment depreciation. Personnel costs in all categories were impacted by higher medical costs compared to the prior year as the COVID-19 pandemic reduced elective procedures in 2020.
  • The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $638.5 million in 2021 and $609.4 million in 2020, but had no net impact on operating income.

Income from investments before taxes totaled $67.3 million in 2021 compared to $32.9 million in 2020.  Net investment income was $62.2 million in 2021 compared to $29.8 million in 2020. Included in net investment income is $31.7 million of limited partnership earnings in 2021 compared to limited partnership losses of $0.6 million in 2020.  Net realized and unrealized gains on investments were $4.9 million in 2021 compared to $6.4 million in 2020. 

4Q 2021 Highlights

Operating income before taxes decreased $3.2 million, or 4.9 percent, in the fourth quarter of 2021 compared to the fourth quarter of 2020.

  • Management fee revenue - policy issuance and renewal services increased $20.6 million, or 4.8 percent, in the fourth quarter of 2021 compared to the fourth quarter of 2020.
  • Management fee revenue allocated to administrative services decreased $0.7 million, or 4.5 percent in the fourth quarter of 2021 compared to the fourth quarter of 2020.
  • Cost of operations - policy issuance and renewal services
    • Commissions increased $18.2 million in the fourth quarter of 2021 compared to the fourth quarter of 2020 primarily driven by direct and affiliated assumed written premium growth.
    • Non-commission expense increased $4.6 million in the fourth quarter of 2021 compared to the fourth quarter of 2020 driven by increases in underwriting and policy processing costs, administrative and other expenses, and customer service costs.
  • The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $165.4 million and $158.2 million in the fourth quarter of 2021 and 2020, respectively, but had no net impact on operating income.

Income from investments before taxes totaled $12.3 million in the fourth quarter of 2021 compared to $14.1 million in the fourth quarter of 2020.  Net investment income was $12.6 million in the fourth quarter of 2021 compared to $9.4 million in the fourth quarter of 2020.  Included in net investment income is $5.0 million of limited partnership earnings in the fourth quarter of 2021 compared to $1.8 million in the fourth quarter of 2020. Net realized and unrealized losses on investments were $0.2 million in the fourth quarter of 2021 compared to net realized and unrealized gains of $4.8 million in the fourth quarter of 2020.

Webcast Information
Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on February 25, 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 12th largest homeowners insurer, 13th 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.

***

"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
December 31,


Twelve months ended
December 31,



2021


2020


2021


2020



(Unaudited)





Operating revenue









Management fee revenue - policy issuance and renewal
services


$        450,286


$        429,698


$     1,913,166


$     1,841,794

Management fee revenue - administrative services


14,301


14,969


58,286


59,463

Administrative services reimbursement revenue


165,350


158,206


638,483


609,435

Service agreement revenue


5,994


6,379


24,042


25,797

Total operating revenue


635,931


609,252


2,633,977


2,536,489










Operating expenses









Cost of operations - policy issuance and renewal services


408,747


385,994


1,677,397


1,588,897

Cost of operations - administrative services


165,350


158,206


638,483


609,435

Total operating expenses


574,097


544,200


2,315,880


2,198,332

Operating income


61,834


65,052


318,097


338,157










Investment income









Net investment income


12,572


9,400


62,177


29,753

Net realized and unrealized investment (losses) gains


(237)


4,757


4,946


6,392

Net impairment (losses) recoveries recognized in earnings


(7)


(86)


209


(3,278)

Total investment income


12,328


14,071


67,332


32,867










Interest expense, net


1,050


723


4,132


731

Other expense


3,285


190


4,893


1,778

Income before income taxes


69,827


78,210


376,404


368,515

Income tax expense


14,785


15,425


78,544


75,211

Net income


$          55,042


$          62,785


$        297,860


$        293,304



















Earnings Per Share









Net income per share









Class A common stock – basic


$              1.18


$              1.35


$              6.40


$              6.30

Class A common stock – diluted


$              1.05


$              1.20


$              5.69


$              5.61

Class B common stock – basic and diluted


$               177


$               202


$               959


$               945










Weighted average shares outstanding – Basic









Class A common stock


46,189,068


49,189,001


46,188,806


46,188,659

Class B common stock


2,542


2,542


2,542


2,542










Weighted average shares outstanding – Diluted









Class A common stock


52,305,628


52,315,670


52,307,302


52,313,360

Class B common stock


2,542


2,542


2,542


2,542










Dividends declared per share









Class A common stock


$            1.110


$            3.035


$            4.215


$            5.930

Class B common stock


$          166.50


$          455.25


$          632.25


$          889.50

 

Erie Indemnity Company

Statements of Financial Position

(in thousands)




December 31, 2021


December 31, 2020

Assets





Current assets:





Cash and cash equivalents


$                   183,702


$                   161,240

Available-for-sale securities


38,396


17,697

Equity securities


0


19

Receivables from Erie Insurance Exchange and affiliates, net


479,123


494,637

Prepaid expenses and other current assets


56,206


52,561

Accrued investment income


6,303


6,146

Total current assets


763,730


732,300






Available-for-sale securities, net


907,689


910,539

Equity securities


87,743


94,071

Fixed assets, net


374,802


265,341

Agent loans, net


58,683


62,449

Deferred income taxes, net


145


12,341

Other assets


49,265


40,081

Total assets


$                2,242,057


$                2,117,122






Liabilities and shareholders' equity





Current liabilities:





Commissions payable


$                   270,746


$                   262,338

Agent bonuses


120,437


110,158

Accounts payable and accrued liabilities


138,317


150,706

Dividends payable


51,693


48,200

Contract liability


34,935


36,917

Deferred executive compensation


12,637


17,319

Current portion of long-term borrowings


2,098


2,031

Total current liabilities


630,863


627,669






Defined benefit pension plan


130,383


164,346

Long-term borrowings


91,734


93,833

Contract liability


17,686


18,878

Deferred executive compensation


14,571


14,904

Other long-term liabilities


14,342


9,444

Total liabilities


899,579


929,074






Shareholders' equity


1,342,478


1,188,048

Total liabilities and shareholders' equity


$                2,242,057


$                2,117,122

 

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SOURCE Erie Indemnity Company

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