Net Income per Diluted Share was $1.25 for the Quarter and $5.71 for the Year

ERIE, Pa., March 1, 2023 /PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the full year and quarter ending December 31, 2022. Net income was $298.6 million, or $5.71 per diluted share, in 2022, compared to $297.9 million, or $5.69 per diluted share, in 2021. Net income was $65.5 million, or $1.25 per diluted share, in the fourth quarter of 2022, compared to $55.0 million, or $1.05 per diluted share, in the fourth quarter of 2021.

The uncertainty resulting from post-pandemic conditions and the current economic environment continues to evolve and the duration or extent of financial impacts remain uncertain.

4Q and Full Year 2022
(dollars in thousands)	4Q'22	4Q'21	2022	2021
Operating income	$ 81,430	$ 61,834	$ 376,214	$ 318,097
Investment income	288	12,328	632	67,332
Interest expense and other, net	(243)	4,335	394	9,025
Income before income taxes	81,961	69,827	376,452	376,404
Income tax expense	16,471	14,785	77,883	78,544
Net income	$ 65,490	$ 55,042	$ 298,569	$ 297,860

2022 Full Year Highlights

Operating income before taxes increased $58.1 million, or 18.3 percent, in 2022 compared to 2021.

Management fee revenue - policy issuance and renewal services increased $174.7 million, or 9.1 percent, in 2022 compared to 2021.

Management fee revenue - administrative services remained consistent at $58.3 million in both 2022 and 2021.

Cost of operations - policy issuance and renewal services

Commissions increased $71.1 million in 2022 compared to 2021 driven by direct and affiliated assumed written premium growth, partially offset by a reduction in agent incentive compensation.

Non-commission expense increased $47.1 million in 2022 compared to 2021. Underwriting and policy processing costs increased $6.4 million primarily due to increased underwriting report, printing, and personnel costs. Information technology costs increased $13.1 million primarily due to increased hardware and software costs and professional fees, partially offset by decreased personnel costs. Sales and advertising costs increased $7.5 million primarily due to increased advertising and agent-related expenses. Administrative and other expenses increased $22.5 million primarily due to an increase in personnel costs related to compensation and increased professional fees.

The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $668.3 million in 2022 and $638.5 million in 2021, but had no net impact on operating income.

Income from investments before taxes totaled $0.6 million in 2022 compared to $67.3 million in 2021. Net investment income was $28.6 million in 2022 compared to $62.2 million in 2021. Included in net investment income is $10.4 million of limited partnership losses in 2022 compared to earnings of $31.7 million in 2021. Net realized and unrealized losses on investments were $27.3 million in 2022 compared to gains of $4.9 million in 2021.

4Q 2022 Highlights

Operating income before taxes increased $19.6 million, or 31.7 percent, in the fourth quarter of 2022 compared to the fourth quarter of 2021.

Management fee revenue - policy issuance and renewal services increased $53.3 million, or 11.8 percent, in the fourth quarter of 2022 compared to the fourth quarter of 2021.

Management fee revenue - administrative services increased $0.6 million, or 4.0 percent in the fourth quarter of 2022 compared to the fourth quarter of 2021.

Cost of operations - policy issuance and renewal services

Commissions increased $15.6 million in the fourth quarter of 2022 compared to the fourth quarter of 2021 primarily driven by direct and affiliated assumed written premium growth, partially offset by a reduction in agent incentive compensation.

Non-commission expense increased $19.3 million in the fourth quarter of 2022 compared to the fourth quarter of 2021. Underwriting and policy processing costs increased $3.5 million primarily due to increased personnel costs, postage and underwriting report costs. Information technology costs increased $5.1 million primarily due to increased hardware and software costs and professional fees. Sales and advertising costs increased $4.4 million primarily due to increased advertising and agent-related expenses. Administrative and other expenses increased $7.5 million primarily due to increased personnel costs.

The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $175.6 million in the fourth quarter of 2022 and $165.4 million in the fourth quarter of 2021, but had no net impact on operating income.

Income from investments before taxes totaled $0.3 million in the fourth quarter of 2022 compared to $12.3 million in the fourth quarter of 2021. Net investment income was $4.0 million in the fourth quarter of 2022 compared to $12.6 million in the fourth quarter of 2021. Included in net investment income is $8.3 million of limited partnership losses in the fourth quarter of 2022 compared to earnings of $5.0 million in the fourth quarter of 2021. Net realized and unrealized losses on investments were $3.5 million in the fourth quarter of 2022 compared to $0.2 million in the fourth quarter of 2021.

Webcast Information

Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on March 2, 2023. Investors may access the pre-recorded audio broadcast by logging on to www.erieinsurance.com.

Erie Insurance Group

According to A.M. Best Company, Erie Insurance Group, based in Erie, Pennsylvania, is the 11th largest homeowners insurer, 13th 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.

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"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;

dependence upon the independent agency system; and

ability to maintain 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 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 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;

outcome of pending and potential litigation;

factors affecting the quality and liquidity of our investment portfolio; and

our 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.r

Erie Indemnity Company Statements of Operations (dollars in thousands, except per share data)

	Three months ended December 31,		Twelve months ended December 31,
	2022	2021	2022	2021
	(Unaudited)
Operating revenue
Management fee revenue - policy issuance and renewal services	$ 503,633	$ 450,286	$ 2,087,846	$ 1,913,166
Management fee revenue - administrative services	14,877	14,301	58,323	58,286
Administrative services reimbursement revenue	175,613	165,350	668,268	638,483
Service agreement revenue	6,512	5,994	25,687	24,042
Total operating revenue	700,635	635,931	2,840,124	2,633,977

Operating expenses
Cost of operations - policy issuance and renewal services	443,592	408,747	1,795,642	1,677,397
Cost of operations - administrative services	175,613	165,350	668,268	638,483
Total operating expenses	619,205	574,097	2,463,910	2,315,880
Operating income	81,430	61,834	376,214	318,097

Investment income
Net investment income	3,979	12,572	28,585	62,177
Net realized and unrealized investment (losses) gains	(3,453)	(237)	(27,286)	4,946
Net impairment (losses) recoveries recognized in earnings	(238)	(7)	(667)	209
Total investment income	288	12,328	632	67,332

Interest expense	—	1,050	2,009	4,132
Other income (expense)	243	(3,285)	1,615	(4,893)
Income before income taxes	81,961	69,827	376,452	376,404
Income tax expense	16,471	14,785	77,883	78,544
Net income	$ 65,490	$ 55,042	$ 298,569	$ 297,860


Earnings Per Share
Net income per share
Class A common stock – basic	$ 1.41	$ 1.18	$ 6.41	$ 6.40
Class A common stock – diluted	$ 1.25	$ 1.05	$ 5.71	$ 5.69
Class B common stock – basic and diluted	$ 211	$ 177	$ 962	$ 959

Weighted average shares outstanding – Basic
Class A common stock	46,189,028	46,189,068	46,188,916	46,188,806
Class B common stock	2,542	2,542	2,542	2,542

Weighted average shares outstanding – Diluted
Class A common stock	52,298,903	52,305,628	52,297,990	52,307,302
Class B common stock	2,542	2,542	2,542	2,542

Dividends declared per share
Class A common stock	$ 1.190	$ 1.110	$ 4.520	$ 4.215
Class B common stock	$ 178.50	$ 166.50	$ 678.00	$ 632.25

Erie Indemnity Company Statements of Financial Position (in thousands)

	December 31, 2022	December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$ 142,090	$ 183,702
Available-for-sale securities	24,267	38,396
Receivables from Erie Insurance Exchange and affiliates, net	524,937	479,123
Prepaid expenses and other current assets	79,201	56,206
Accrued investment income	8,301	6,303
Total current assets	778,796	763,730

Available-for-sale securities, net	870,394	907,689
Equity securities	72,560	87,743
Fixed assets, net	413,874	374,802
Agent loans, net	60,537	58,683
Deferred income taxes, net	0	145
Other assets	43,295	49,265
Total assets	$ 2,239,456	$ 2,242,057

Liabilities and shareholders' equity
Current liabilities:
Commissions payable	$ 300,028	$ 270,746
Agent bonuses	95,166	120,437
Accounts payable and accrued liabilities	165,915	138,317
Dividends payable	55,419	51,693
Contract liability	36,547	34,935
Deferred executive compensation	12,036	12,637
Current portion of long-term borrowings	—	2,098
Total current liabilities	665,111	630,863

Defined benefit pension plans	51,224	130,383
Long-term borrowings	—	91,734
Contract liability	17,895	17,686
Deferred executive compensation	13,724	14,571
Deferred income taxes, net	14,075	0
Other long-term liabilities	29,019	14,342
Total liabilities	791,048	899,579

Shareholders' equity	1,448,408	1,342,478
Total liabilities and shareholders' equity	$ 2,239,456	$ 2,242,057

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SOURCE Erie Indemnity Company

Erie Indemnity Reports Full Year and Fourth Quarter 2022 Results