Net Income per Diluted Share was $1.71 for the Quarter and $4.41 for the Nine Months of 2020
Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter and nine months ending September 30, 2020. Net income was $89.2 million, or $1.71 per diluted share, in the third quarter of 2020, compared to $94.2 million, or $1.80 per diluted share, in the third quarter of 2019. Net income was $230.5 million, or $4.41 per diluted share, in the first nine months of 2020, compared to $257.2 million, or $4.92 per diluted share, in the first nine months of 2019.
The significant disruption to the economy and financial markets resulting from the COVID-19 pandemic that began in the first quarter of 2020 continues to evolve and the pandemic's ultimate impact and duration remain highly uncertain at this time. While the Exchange experienced declines in new business premium in the second quarter of 2020 due to the pandemic, new business premiums grew 10.4% in the third quarter of 2020 compared to the same period in 2019. The financial markets substantially recovered in the third quarter from the financial volatility negatively impacting our portfolio in the first quarter of 2020, improving our investment results in the third quarter.
3Q 2020
|
(in thousands) |
3Q'20 | 3Q'19 |
|---|---|---|
|
Operating income |
$ 96,225 |
$ 105,907 |
|
Investment income |
16,438 |
13,606 |
|
Interest expense and other income, net |
967 |
11 |
|
Income before income taxes |
111,696 |
119,502 |
|
Income tax expense |
22,480 |
25,333 |
|
Net income |
$ 89,216 |
$ 94,169 |
Nine Months 2020
|
(in thousands) |
2020 | 2019 |
|---|---|---|
|
Operating income |
$ 273,105 |
$ 288,639 |
|
Investment income |
18,796 |
33,053 |
|
Interest expense and other income, net |
1,596 |
637 |
|
Income before income taxes |
290,305 |
321,055 |
|
Income tax expense |
59,786 |
63,821 |
|
Net income |
$ 230,519 |
$ 257,234 |
3Q 2020 Highlights
Operating income before taxes decreased $9.7 million, or 9.1 percent, in the third quarter of 2020 compared to the third quarter of 2019.
- Management fee revenue - policy issuance and renewal services increased $10.1 million, or 2.1 percent, in the third quarter of 2020 compared to the third quarter of 2019.
- Management fee revenue - administrative services increased $0.5 million, or 3.3 percent, in the third quarter of 2020 compared to the third quarter of 2019.
- Cost of operations - policy issuance and renewal services
- Commissions increased $6.2 million in the third quarter of 2020 compared to the third quarter of 2019, primarily driven by direct and affiliated assumed written premium growth.
- Non-commission expense increased $13.2 million in the third quarter of 2020 compared to the third quarter of 2019. Underwriting and policy processing expense increased $3.2 million primarily due to increases in personnel costs and underwriting report costs. Administrative and other costs increased $8.8 million primarily driven by higher incentive plan award accruals due to the Exchange's lower combined ratio and the change in the company stock price, which experienced an increase in the third quarter of 2020 compared to a decrease in the same period in 2019.Increased professional fees also contributed to the increase in administrative and other costs compared to the same period in 2019.
Income from investments before taxes totaled $16.4 million in the third quarter of 2020 compared to $13.6 million in the third quarter of 2019. Net realized gains on investments were $5.9 million in the third quarter of 2020 compared to $1.7 million in the third quarter of 2019. Net investment income was $7.0 million in the third quarter of 2020 compared to $8.7 million in the third quarter of 2019. Earnings from limited partnerships were $3.6 million in the third quarter of 2020 compared to earnings of $3.3 million in the third quarter of 2019.
Nine Months 2020 Highlights
Operating income before taxes decreased $15.5 million, or 5.4 percent, in the first nine months of 2020 compared to the first nine months of 2019.
- Management fee revenue - policy issuance and renewal services increased $26.2 million, or 1.9 percent, in the first nine months of 2020 compared to the first nine months of 2019.
- Management fee revenue - administrative services increased $1.9 million, or 4.5 percent, in the first nine months of 2020 compared to the first nine months of 2019.
- Cost of operations - policy issuance and renewal services
- Commissions increased $20.4 million in the first nine months of 2020 compared to the first nine months of 2019, primarily driven by a 1.9% increase in direct and affiliated assumed written premium growth and increases in agent incentive compensation due to improved agent profitability.
- Non-commission expense increased $21.9 million in the first nine months of 2020 compared to the first nine months of 2019.Information technology costs increased $6.4 million primarily due to increases in hardware and software costs, personnel costs, and professional fees. Underwriting and policy processing expense increased $6.0 million primarily due to increases in personnel costs and underwriting report costs. Administrative and other costs increased $6.3 million primarily driven by increases in personnel costs and professional fees. Increased personnel costs in all categories included higher incentive plan award accruals due to Exchange's lower combined ratio and higher vacation accruals as employees took less vacation in the first nine months of 2020 as a result of the COVID-19 pandemic.
Income from investments before taxes totaled $18.8 million in the first nine months of 2020 compared to $33.1 million in the first nine months of 2019. Net investment income was $22.8 million in the first nine months of 2020 compared to $25.2 million in the first nine months of 2019. Net realized gains on investments were $1.6 million in the first nine months of 2020 compared to $5.5 million in the first nine months of 2019. Net impairment losses of $3.2 million in the first nine months of 2020 were driven by the COVID-19 pandemic's impact on the financial markets. Losses from limited partnerships were $2.4 million in the first nine months of 2020 compared to earnings of $2.5 million in the first nine months of 2019.
Webcast Information
Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on October 30, 2020. Investors may access the pre-recorded audio broadcast by logging on to www.erieinsurance.com.