Skip to main content

Erie Indemnity Reports Third Quarter 2019 Results

Net Income per Diluted Share up 17 percent for the Quarter and 14 percent Year to Date

Erie, Pa. - October 24, 2019 - Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter and nine months ending September 30, 2019.  Net income was $94.2 million, or $1.80 per diluted share, in the third quarter of 2019, compared to $80.4 million, or $1.54 per diluted share, in the third quarter of 2018.  Net income was $257.2 million, or $4.92 per diluted share, in the first nine months of 2019, compared to $225.9 million, or $4.32 per diluted share, in the first nine months of 2018.

3Q 2019

(in thousands)

3Q'19

3Q'18

Operating income

$105,907

$96,695

Investment income

13,606

6,207

Interest expense and other income, net

11

655

Income before income taxes

119,502

104,471

Income tax expense

25,333

24,025

Net income

$94,169

$80,446

(in thousands)

Operating income

3Q'19

$105,907

3Q'18

$96,695

(in thousands)

Investment income

3Q'19

13,606

3Q'18

6,207

(in thousands)

Interest expense and other income, net

3Q'19

11

3Q'18

655

(in thousands)

Income before income taxes

3Q'19

119,502

3Q'18

104,471

(in thousands)

Income tax expense

3Q'19

25,333

3Q'18

24,025

Nine Months 2019

(in thousands)

'19

'18

Operating income

288,639 

$269,585

Investment income

33,053

20,801

Interest expense and other income, net

637

1,708

Income before income taxes

321,055

184,207

Income tax expense

63,821

62,768

Net income

$257,234

$225,910

(in thousands)

Operating income

'19

288,639 

'18

$269,585

(in thousands)

Investment income

'19

33,053

'18

20,801

(in thousands)

Interest expense and other income, net

'19

637

'18

1,708

(in thousands)

Income before income taxes

'19

321,055

'18

184,207

(in thousands)

Income tax expense

'19

63,821

'18

62,768

3Q 2019 Highlights

Operating income before taxes increased $9.2 million, or 9.5 percent, in the third quarter of 2019 compared to the third quarter of 2018.

  • Management fee revenue - policy issuance and renewal services increased $23.1 million, or 5.1 percent, in the third quarter of 2019 compared to the third quarter of 2018.
  • Management fee revenue - administrative services increased $0.9 million, or 6.7 percent, in the third quarter of 2019 compared to the third quarter of 2018.
  • Cost of operations - policy issuance and renewal services
  • Commissions increased $10.2 million in the third quarter of 2019 compared to the third quarter of 2018, as a result of the 5.2 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 third quarter of 2018.
  • – Non-commission expense increased $4.6 million in the third quarter of 2019 compared to the third quarter of 2018.Information technology costs increased $5.4 million primarily due to increased professional fees.Underwriting and policy processing expense increased $1.9 million primarily due to underwriting report costs and other policy acquisition costs.Customer service costs increased $1.0 million primarily due to increased personnel costs.Administrative and other expenses decreased $2.9 million primarily driven by a decrease in long-term incentive plan cost due to a decrease in the company stock price in the third quarter of 2019.Personnel costs in all expense categories were impacted by lower estimated costs for incentive plans related to underwriting performance.
  • The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $142.7 million in the third quarter of 2019, but had no net impact on operating income.

Income from investments before taxes totaled $13.6 million in the third quarter of 2019 compared to $8.4 million in the third quarter of 2018.  Earnings from limited partnerships were $3.3 million in the third quarter of 2019 compared to $0.8 million in the third quarter of 2018.  Net realized gains increased $1.7 million in the third quarter of 2019 compared to the third quarter of 2018.  Net investment income was $8.7 million in the third quarter of 2019 compared to $7.7 million in the third quarter of 2018.

Nine Months 2019 Highlights

Operating income before taxes increased $19.1 million, or 7.1 percent, in the first nine months of 2019 compared to the first nine months of 2018.

  • Management fee revenue - policy issuance and renewal services increased $74.0 million, or 5.6 percent, in the first nine months of 2019 compared to the first nine months of 2018.
  • Management fee revenue allocated to administrative services increased $2.7 million, or 6.7 percent, in the first nine months of 2019 compared to the first nine months of 2018.
  • Cost of operations - policy issuance and renewal services
  • Commissions increased $30.8 million in the first nine months of 2019 compared to the first nine months 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 first nine months of 2018.
  • Non-commission expense increased $26.3 million for the nine months ended September 30, 2019 compared to the same period in 2018.Information technology costs increased $17.1 million primarily due to increased professional fees.Administrative and other expenses increased $6.1 million primarily driven by an increase in long-term incentive plan cost due to a higher company stock price during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018.Personnel costs in all expense categories were impacted by additional bonuses awarded to all employees of approximately $1.1 million for the nine months ended September 30, 2019 and $4.8 million for the nine months ended September 30, 2018.
  • The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $431.3 million in the first nine months of 2019, but had no net impact on operating income.

Income from investments before taxes totaled $33.1 million in the first nine months of 2019 compared to $20.8 million in the first nine months of 2018.  Net realized gains on investments were $5.5 million in the first nine months of 2019 compared to net realized losses of $0.5 million in the first nine months of 2018.  Net investment income was $25.2 million in the first nine months of 2019 compared to $21.6 million in the first nine months of 2018, and earnings from limited partnerships were $2.5 million in the first nine months of 2019 compared to $0.4 million in the first nine months of 2018.

Webcast Information

Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on October 25, 2019.  Investors may access the pre-recorded audio broadcast by logging on to www.erieinsurance.com.