Net Income was $59.3 million, Earnings per Diluted Share was $1.13
Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter ending March 31, 2020.Net income was $59.3 million, or $1.13 per diluted share, in the first quarter of 2020, compared to $75.3 million, or $1.44 per diluted share, in the first quarter of 2019.
On March 11, 2020, the outbreak of the coronavirus (“COVID-19”) was declared a global pandemic. The impacts of the pandemic and efforts to mitigate the spread of the virus have had significant adverse impacts on economic conditions and financial markets. We did not experience significant financial impacts on our core businesses of policy issuance and renewal services and administrative services in the first quarter of 2020.However, the financial market volatility did have a significant impact on our first quarter 2020 investment portfolio.
1Q 2020
|
(in thousands) |
1Q'20 | 1Q'19 |
|---|---|---|
|
Operating income |
$ 85,691 |
$ 86,122 |
|
Investment income |
(9,195) |
9,795 |
|
Interest expense and other income, net |
369 |
402 |
|
Income before income taxes |
76,127 |
95,515 |
|
Income tax expense |
16,801 |
20,204 |
|
Net income |
$ 59,326 |
$ 75,311 |
1Q 2020 Highlights
Management fee revenue - policy issuance and renewal services increased $12.8 million, or 3.0 percent, in the first quarter of 2020 compared to the first quarter of 2019.Operating income before taxes decreased $0.4 million, or 0.5 percent, in the first quarter of 2020 compared to the first quarter of 2019.
- Management fee revenue - administrative services increased $0.8 million, or 5.9 percent, in the first quarter of 2020 compared to the first quarter of 2019.
- Cost of operations - policy issuance and renewal services
- Commissions increased $9.0 million in the first quarter of 2020 compared to the first quarter of 2019. The increase was primarily driven by the growth in direct and affiliated assumed premiums written by the Exchange of 3.5 percent in the first quarter of 2020. The estimated agent incentive payouts at March 31, 2020 are based on actual underwriting results for the two prior years and current year-to-date actual results and forecasted results for the remainder of 2020. Therefore, fluctuations in the current quarter underwriting results can impact the estimated incentive payout on a quarter-to-quarter basis.
- Non-commission expense increased $5.0 million in the first quarter of 2020 compared to the first quarter of 2019.Underwriting and policy processing expense increased $3.1 million primarily due to increased personnel costs and underwriting report costs. Information technology costs increased $3.0 million primarily due to increased professional fees and personnel costs. Administrative and other expenses decreased $2.2 million primarily driven by a decrease in long-term incentive plan cost due to a decrease in the company stock price in the first quarter of 2020 compared to an increase in the first quarter of 2019.
Loss from investments before taxes totaled $9.2 million in the first quarter of 2020 compared to income of $9.8 million in the first quarter of 2019.Net realized losses were $10.8 million in the first quarter of 2020 compared to net realized gains of $2.5 million in the first quarter of 2019 driven by decreases in the fair value of equity securities due to significant financial market volatility resulting from the COVID-19 pandemic. Net impairment losses of $3.1 million in the first quarter of 2020 were also driven by the COVID-19 pandemic's impact on the financial markets. Losses from limited partnerships were $3.7 million in the first quarter of 2020 compared to losses of $1.1 million in the first quarter of 2019.
Webcast Information
Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on May 8, 2020. Investors may access the pre-recorded audio broadcast by logging on to www.erieinsurance.com.