Erie Indemnity Reports Full Year and Fourth Quarter 2023 Results

Published

Net Income per Diluted Share was $2.12 for the Quarter and $8.53 for the Year

ERIE, Pa., Feb. 26, 2024 /PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the full year and quarter ending December 31, 2023.  Net income was $446.1 million, or $8.53 per diluted share, in 2023, compared to $298.6 million, or $5.71 per diluted share, in 2022.  Net income was $110.9 million, or $2.12 per diluted share, in the fourth quarter of 2023, compared to $65.5 million, or $1.25 per diluted share, in the fourth quarter of 2022.

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

4Q and Full Year 2023

(in thousands)

4Q'23

4Q'22

2023

2022

Operating income

$     127,084

$       81,430

$     520,256

$     376,214

Investment income

9,771

288

28,968

632

Interest expense and other (income), net

(3,069)

(243)

(12,712)

394

Income before income taxes

139,924

81,961

561,936

376,452

Income tax expense

28,996

16,471

115,875

77,883

Net income

$     110,928

$       65,490

$     446,061

$     298,569

     2023 Full Year Highlights     

Operating income before taxes increased $144.0 million, or 38.3 percent, in 2023 compared to 2022.

  • Management fee revenue - policy issuance and renewal services increased $354.2 million, or 17.0 percent, in 2023 compared to 2022.  
  • Management fee revenue - administrative services increased $5.3 million, or 9.2% in 2023 compared to 2022.
  • Cost of operations - policy issuance and renewal services
    • Commissions increased $169.0 million in 2023 compared to 2022 primarily driven by the growth in direct and affiliated assumed written premium, partially offset by a decrease in agent incentive compensation. 
    • Non-commission expense increased $46.9 million in 2023 compared to 2022.  Underwriting and policy processing costs increased $9.4 million primarily due to policies in force growth.  Information technology costs increased $18.6 million primarily due to increased professional fees, personnel costs, and hardware and software costs.  Administrative and other expenses increased $20.0 million primarily due to an increase in personnel costs.  Personnel costs in 2023 were impacted by increased compensation including higher estimated costs for incentive plan awards, partially offset by lower pension costs due to an increase in the discount rate compared to 2022.  Increases in incentive plan costs were driven by improved direct written premium and policies in force growth and Indemnity's higher stock price at year-end 2023 compared to 2022.
  • The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $737.1 million in 2023 and $668.3 million in 2022, but had no net impact on operating income. 

Income from investments before taxes totaled $29.0 million in 2023 compared to $0.6 million in 2022.  Net investment income was $44.6 million in 2023 compared to $28.6 million in 2022.  Net investment income included limited partnership losses of $11.3 million in 2023 compared to $10.4 million in 2022.  Net realized and unrealized losses on investments were $5.8 million in 2023 compared to $27.3 million in 2022.  Net impairment losses recognized in earnings were $9.8 million in 2023 compared to $0.7 million in 2022. 

     4Q 2023 Highlights     

Operating income before taxes increased $45.7 million, or 56.1 percent, in the fourth quarter of 2023 compared to the fourth quarter of 2022.

  • Management fee revenue - policy issuance and renewal services increased $98.0 million, or 19.5 percent, in the fourth quarter of 2023 compared to the fourth quarter of 2022. 
  • Management fee revenue - administrative services increased $1.8 million, or 12.2 percent in the fourth quarter of 2023 compared to the fourth quarter of 2022.
  • Cost of operations - policy issuance and renewal services
    • Commissions increased $53.1 million in the fourth quarter of 2023 compared to the fourth quarter of 2022 primarily driven by the growth in direct and affiliated assumed written premium.
    • Non-commission expense increased $1.2 million in the fourth quarter of 2023 compared to the fourth quarter of 2022.  Information technology costs increased $2.9 million primarily due to increased professional fees and personnel costs.  Sales and advertising costs decreased $2.4 million primarily due to decreased advertising expenses.  Customer service costs increased $0.8 million primarily due to increased bank charges and personnel costs.
  • The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $192.7 million in the fourth quarter of 2022 and $175.6 million in the fourth quarter of 2022, but had no net impact on operating income. 

Income from investments before taxes totaled $9.8 million in the fourth quarter of 2023 compared to $0.3 million in the fourth quarter of 2022.  Net investment income was $14.2 million in the fourth quarter of 2023 compared to $4.0 million in the fourth quarter of 2022.  Net investment income included limited partnership losses of $0.6 million in the fourth quarter of 2023 compared to $8.3 million in the fourth quarter of 2022.  Net realized and unrealized gains on investments were $3.4 million in the fourth quarter of 2023 compared to losses of $3.5 million in the fourth quarter of 2022.  Net impairment losses recognized in earnings were $7.8 million in the fourth quarter of 2023 compared to $0.2 million in the fourth quarter of 2022.

Webcast InformationIndemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on February 27, 2024.  Investors may access the pre-recorded audio broadcast by logging on to www.erieinsurance.com.

Erie Insurance GroupAccording to A.M. Best Company, Erie Insurance Group, based in Erie, Pennsylvania, is the 12th largest homeowners insurer, 12th 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 19th 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, 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 December 31,

Twelve months ended December 31,

2023

2022

2023

2022

(Unaudited)

Operating revenue

Management fee revenue - policy issuance and renewal services

$        601,595

$        503,633

$     2,442,073

$     2,087,846

Management fee revenue - administrative services

16,693

14,877

63,669

58,323

Administrative services reimbursement revenue

192,728

175,613

737,139

668,268

Service agreement revenue

6,651

6,512

26,059

25,687

Total operating revenue

817,667

700,635

3,268,940

2,840,124

Operating expenses

Cost of operations - policy issuance and renewal services

497,855

443,592

2,011,545

1,795,642

Cost of operations - administrative services

192,728

175,613

737,139

668,268

Total operating expenses

690,583

619,205

2,748,684

2,463,910

Operating income

127,084

81,430

520,256

376,214

Investment income

Net investment income

14,212

3,979

44,572

28,585

Net realized and unrealized investment gains (losses)

3,408

(3,453)

(5,838)

(27,286)

Net impairment losses recognized in earnings

(7,849)

(238)

(9,766)

(667)

Total investment income

9,771

288

28,968

632

Interest expense

2,009

Other income

3,069

243

12,712

1,615

Income before income taxes

139,924

81,961

561,936

376,452

Income tax expense

28,996

16,471

115,875

77,883

Net income

$        110,928

$          65,490

$         446,061

$         298,569

Earnings Per Share

Net income per share

Class A common stock – basic

$               2.38

$               1.41

$               9.58

$               6.41

Class A common stock – diluted

$               2.12

$               1.25

$               8.53

$               5.71

Class B common stock – basic and diluted

$                357

$                211

$             1,437

$                962

Weighted average shares outstanding – Basic

Class A common stock

46,189,041

46,189,028

46,188,981

46,188,916

Class B common stock

2,542

2,542

2,542

2,542

Weighted average shares outstanding – Diluted

Class A common stock

52,301,676

52,298,903

52,299,411

52,297,990

Class B common stock

2,542

2,542

2,542

2,542

Dividends declared per share

Class A common stock

$             1.275

$             1.190

$             4.845

$             4.520

Class B common stock

$          191.25

$          178.50

$           726.75

$           678.00

 

Erie Indemnity Company

Statements of Financial Position

(in thousands)

December 31, 2023

December 31, 2022

Assets

Current assets:

Cash and cash equivalents (includes restricted cash of $12,542 and $11,932, respectively)

$                     144,055

$                     142,090

Available-for-sale securities

82,017

24,267

Receivables from Erie Insurance Exchange and affiliates, net

625,338

524,937

Prepaid expenses and other current assets

69,321

79,201

Accrued investment income

9,458

8,301

Total current assets

930,189

778,796

Available-for-sale securities, net

879,224

870,394

Equity securities

84,253

72,560

Fixed assets, net

442,610

413,874

Agent loans, net

58,434

60,537

Defined benefit pension plan

34,320

0

Other assets, net

42,934

43,295

Total assets

$                 2,471,964

$                 2,239,456

Liabilities and shareholders' equity

Current liabilities:

Commissions payable

$                     353,709

$                     300,028

Agent incentive compensation

68,077

95,166

Accounts payable and accrued liabilities

175,622

165,915

Dividends payable

59,377

55,419

Contract liability

41,210

36,547

Deferred executive compensation

10,982

12,036

Total current liabilities

708,977

665,111

Defined benefit pension plans

26,260

51,224

Contract liability

19,910

17,895

Deferred executive compensation

20,936

13,724

Deferred income taxes, net

11,481

14,075

Other long-term liabilities

21,565

29,019

Total liabilities

809,129

791,048

Shareholders' equity

1,662,835

1,448,408

Total liabilities and shareholders' equity

$                 2,471,964

$                 2,239,456

 

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SOURCE Erie Indemnity Company

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