Erie Indemnity Reports Full Year and Fourth Quarter 2021 Results
- 24
PR Newswire
ERIE, Pa., Feb. 24, 2022
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.
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 |
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|
(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 |
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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.
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Erie Indemnity Company Statements of Operations (dollars in thousands, except per share data) |
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Three months ended |
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Twelve months ended |
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2021 |
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2020 |
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2021 |
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2020 |
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(Unaudited) |
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Operating revenue |
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Management fee revenue -
policy issuance and renewal |
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$ 450,286 |
|
$ 429,698 |
|
$ 1,913,166 |
|
$ 1,841,794 |
|
Management fee revenue - administrative services |
|
14,301 |
|
14,969 |
|
58,286 |
|
59,463 |
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Administrative services reimbursement revenue |
|
165,350 |
|
158,206 |
|
638,483 |
|
609,435 |
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Service agreement revenue |
|
5,994 |
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6,379 |
|
24,042 |
|
25,797 |
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Total operating revenue |
|
635,931 |
|
609,252 |
|
2,633,977 |
|
2,536,489 |
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Operating expenses |
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Cost of operations - policy issuance and renewal services |
|
408,747 |
|
385,994 |
|
1,677,397 |
|
1,588,897 |
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Cost of operations - administrative services |
|
165,350 |
|
158,206 |
|
638,483 |
|
609,435 |
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Total operating expenses |
|
574,097 |
|
544,200 |
|
2,315,880 |
|
2,198,332 |
|
Operating income |
|
61,834 |
|
65,052 |
|
318,097 |
|
338,157 |
|
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Investment income |
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Net investment income |
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12,572 |
|
9,400 |
|
62,177 |
|
29,753 |
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Net realized and unrealized investment (losses) gains |
|
(237) |
|
4,757 |
|
4,946 |
|
6,392 |
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Net impairment (losses) recoveries recognized in earnings |
|
(7) |
|
(86) |
|
209 |
|
(3,278) |
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Total investment income |
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12,328 |
|
14,071 |
|
67,332 |
|
32,867 |
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Interest expense, net |
|
1,050 |
|
723 |
|
4,132 |
|
731 |
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Other expense |
|
3,285 |
|
190 |
|
4,893 |
|
1,778 |
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Income before income taxes |
|
69,827 |
|
78,210 |
|
376,404 |
|
368,515 |
|
Income tax expense |
|
14,785 |
|
15,425 |
|
78,544 |
|
75,211 |
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Net income |
|
$ 55,042 |
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$ 62,785 |
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$ 297,860 |
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$ 293,304 |
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Earnings Per Share |
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Net income per share |
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Class A common stock – basic |
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$ 1.18 |
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$ 1.35 |
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$ 6.40 |
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$ 6.30 |
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Class A common stock – diluted |
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$ 1.05 |
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$ 1.20 |
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$ 5.69 |
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$ 5.61 |
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Class B common stock – basic and diluted |
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$ 177 |
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$ 202 |
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$ 959 |
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$ 945 |
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Weighted average shares outstanding – Basic |
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Class A common stock |
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46,189,068 |
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49,189,001 |
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46,188,806 |
|
46,188,659 |
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Class B common stock |
|
2,542 |
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2,542 |
|
2,542 |
|
2,542 |
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Weighted average shares outstanding – Diluted |
|
|
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Class A common stock |
|
52,305,628 |
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52,315,670 |
|
52,307,302 |
|
52,313,360 |
|
Class B common stock |
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2,542 |
|
2,542 |
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2,542 |
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2,542 |
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Dividends declared per share |
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Class A common stock |
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$ 1.110 |
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$ 3.035 |
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$ 4.215 |
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$ 5.930 |
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Class B common stock |
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$ 166.50 |
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$ 455.25 |
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$ 632.25 |
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$ 889.50 |
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Erie Indemnity Company Statements of Financial Position (in thousands) |
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December 31, 2021 |
|
December 31, 2020 |
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Assets |
|
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Current assets: |
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Cash and cash equivalents |
|
$ 183,702 |
|
$ 161,240 |
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Available-for-sale securities |
|
38,396 |
|
17,697 |
|
Equity securities |
|
0 |
|
19 |
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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 |
|
|
|
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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 |
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Other assets |
|
49,265 |
|
40,081 |
|
Total assets |
|
$ 2,242,057 |
|
$ 2,117,122 |
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Liabilities and shareholders' equity |
|
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Current liabilities: |
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Commissions payable |
|
$ 270,746 |
|
$ 262,338 |
|
Agent bonuses |
|
120,437 |
|
110,158 |
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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 |
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|
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|
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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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