Erie Indemnity Reports Second Quarter 2019 Results

 

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Net Income per Diluted Share up 10.1 percent for the Quarter and 12.1 percent for the First Half of 2019

 

Erie, Pa. - July 25, 2019 - Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter and six months ending June 30, 2019.  Net income was $87.8 million, or $1.68 per diluted share, in the second quarter of 2019, compared to $79.7 million, or $1.52 per diluted share, in the second quarter of 2018.  Net income was $163.1 million, or $3.12 per diluted share, in the first six months of 2019, compared to $145.5 million, or $2.78 per diluted share, in the first six months of 2018.

2Q 2019
(in thousands)	2Q'19			2Q'18
Operating income	$	96,610		$	95,323
Investment income	9,652			6,207
Interest expense and other income, net	224			544
Income before income taxes	106,038			100,986
Income tax expense	18,284			21,280
Net income	$	87,754		$	79,706

First Half 2019
(in thousands)	1H'19			1H'18
Operating income	$	182,732		$	172,890
Investment income	19,447			12,370
Interest expense and other income, net	626			1,053
Income before income taxes	201,553			184,207
Income tax expense	38,488			38,743
Net income	$	163,065		$	145,464

 

2Q 2019 Highlights

Operating income before taxes increased $1.3 million, or 1.3 percent, in the second quarter of 2019 compared to the second quarter of 2018.

• Management fee revenue - policy issuance and renewal services increased $25.9 million, or 5.7 percent, in the second quarter of 2019 compared to the second quarter of 2018.
• Management fee revenue - administrative services increased $0.9 million, or 6.7 percent, in the second quarter of 2019 compared to the second quarter of 2018.
• Cost of operations - policy issuance and renewal services

• Commissions increased $11.7 million in the second quarter of 2019 compared to the second quarter of 2018, as a result of the 5.6 percent increase in direct and affiliated assumed premiums written by the Exchange, partially offset by lower agent incentive costs related to less profitable growth, compared to the second quarter of 2018.
• Non-commission expense increased $13.7 million in the second quarter of 2019 compared to the second quarter of 2018.Information technology costs increased $6.2 million primarily due to increased professional fees.Customer service costs increased $1.5 million primarily due to increased personnel costs.Administrative and other expenses increased $4.7 million primarily driven by an increase in long-term incentive plan cost due to a higher company stock price during the second quarter of 2019 compared to the second quarter of 2018.Personnel costs in all expense categories for the second quarter of 2019 were impacted by additional bonuses awarded to all employees of approximately $1.1 million.

• The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $146.1 million in the second quarter of 2019, but had no net impact on operating income.

Income from investments before taxes totaled $9.7 million in the second quarter of 2019 compared to $6.2 million in the second quarter of 2018.  Net realized gains increased $1.3 million in the second quarter of 2019 compared to the second quarter of 2018.  Net investment income was $8.0 million in the second quarter of 2019 compared to $7.1 million in the second quarter of 2018.  Earnings from limited partnerships were $0.4 million in the second quarter of 2019 compared to losses of $0.2 million in the second quarter of 2018.

First Half 2019 Highlights

Operating income before taxes increased $9.8 million, or 5.7 percent, in the first six months of 2019 compared to the first six months of 2018.

• Management fee revenue - policy issuance and renewal services increased $50.9 million, or 5.9 percent, in the first six months of 2019 compared to the first six months of 2018.
• Management fee revenue allocated to administrative services increased $1.8 million, or 6.7 percent, in the first six months of 2019 compared to the first six months of 2018.
• Cost of operations - policy issuance and renewal services

• Commissions increased $20.6 million in the first six months of 2019 compared to the first six months of 2018, as a result of the 5.8 percent increase in direct and affiliated assumed premiums written by the Exchange, partially offset by lower agent incentive costs related to less profitable growth, compared to the first six months of 2018.
• Non-commission expense increased $21.7 million for the six months ended June 30, 2019 compared to the same period in 2018.Information technology costs increased $11.7 million primarily due to increased professional fees.Administrative and other expenses increased $9.0 million primarily driven by an increase in long-term incentive plan cost due to a higher company stock price during the six months ended June 30, 2019 compared to the six months ended June 30, 2018.Personnel costs in all expense categories were impacted by additional bonuses awarded to all employees of approximately $1.1 million for the six months ended June 30, 2019 and $4.8 million for the six months ended June 30, 2018.

• The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $288.6 million in the first six months of 2019, but had no net impact on operating income.

Income from investments before taxes totaled $19.4 million in the first six months of 2019 compared to $12.4 million in the first six months of 2018.  Net realized gains on investments were $3.8 million in the first six months of 2019 compared to net realized losses of $0.5 million in the first six months of 2018.  Net investment income was $16.5 million in the first six months of 2019 compared to $13.9 million in the first six months of 2018, while losses on limited partnerships were $0.7 million in the first six months of 2019 compared to $0.4 million in the first six months of 2018.

Webcast Information

Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on July 26, 2019.  Investors may access the pre-recorded audio broadcast by logging on to www.erieinsurance.com.