Net Income per Diluted Share was $2.12 for the Quarter and $8.53 for the Year
ERIE, Pa., Feb. 26, 2024 /PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the full year and quarter ending December 31, 2023. Net income was $446.1 million, or $8.53 per diluted share, in 2023, compared to $298.6 million, or $5.71 per diluted share, in 2022. Net income was $110.9 million, or $2.12 per diluted share, in the fourth quarter of 2023, compared to $65.5 million, or $1.25 per diluted share, in the fourth quarter of 2022.
4Q and Full Year 2023 | ||||||
(in thousands) | 4Q'23 | 4Q'22 | 2023 | 2022 | ||
Operating income | $ 127,084 | $ 81,430 | $ 520,256 | $ 376,214 | ||
Investment income | 9,771 | 288 | 28,968 | 632 | ||
Interest expense and other (income), net | (3,069) | (243) | (12,712) | 394 | ||
Income before income taxes | 139,924 | 81,961 | 561,936 | 376,452 | ||
Income tax expense | 28,996 | 16,471 | 115,875 | 77,883 | ||
Net income | $ 110,928 | $ 65,490 | $ 446,061 | $ 298,569 | ||
2023 Full Year Highlights |
Operating income before taxes increased $144.0 million, or 38.3 percent, in 2023 compared to 2022.
- Management fee revenue - policy issuance and renewal services increased $354.2 million, or 17.0 percent, in 2023 compared to 2022.
- Management fee revenue - administrative services increased $5.3 million, or 9.2% in 2023 compared to 2022.
- Cost of operations - policy issuance and renewal services
- Commissions increased $169.0 million in 2023 compared to 2022 primarily driven by the growth in direct and affiliated assumed written premium, partially offset by a decrease in agent incentive compensation.
- Non-commission expense increased $46.9 million in 2023 compared to 2022. Underwriting and policy processing costs increased $9.4 million primarily due to policies in force growth. Information technology costs increased $18.6 million primarily due to increased professional fees, personnel costs, and hardware and software costs. Administrative and other expenses increased $20.0 million primarily due to an increase in personnel costs. Personnel costs in 2023 were impacted by increased compensation including higher estimated costs for incentive plan awards, partially offset by lower pension costs due to an increase in the discount rate compared to 2022. Increases in incentive plan costs were driven by improved direct written premium and policies in force growth and Indemnity's higher stock price at year-end 2023 compared to 2022.
- The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $737.1 million in 2023 and $668.3 million in 2022, but had no net impact on operating income.
Income from investments before taxes totaled $29.0 million in 2023 compared to $0.6 million in 2022. Net investment income was $44.6 million in 2023 compared to $28.6 million in 2022. Net investment income included limited partnership losses of $11.3 million in 2023 compared to $10.4 million in 2022. Net realized and unrealized losses on investments were $5.8 million in 2023 compared to $27.3 million in 2022. Net impairment losses recognized in earnings were $9.8 million in 2023 compared to $0.7 million in 2022.
4Q 2023 Highlights |
Operating income before taxes increased $45.7 million, or 56.1 percent, in the fourth quarter of 2023 compared to the fourth quarter of 2022.
- Management fee revenue - policy issuance and renewal services increased $98.0 million, or 19.5 percent, in the fourth quarter of 2023 compared to the fourth quarter of 2022.
- Management fee revenue - administrative services increased $1.8 million, or 12.2 percent in the fourth quarter of 2023 compared to the fourth quarter of 2022.
- Cost of operations - policy issuance and renewal services
- Commissions increased $53.1 million in the fourth quarter of 2023 compared to the fourth quarter of 2022 primarily driven by the growth in direct and affiliated assumed written premium.
- Non-commission expense increased $1.2 million in the fourth quarter of 2023 compared to the fourth quarter of 2022. Information technology costs increased $2.9 million primarily due to increased professional fees and personnel costs. Sales and advertising costs decreased $2.4 million primarily due to decreased advertising expenses. Customer service costs increased $0.8 million primarily due to increased bank charges and personnel costs.
- The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $192.7 million in the fourth quarter of 2022 and $175.6 million in the fourth quarter of 2022, but had no net impact on operating income.
Income from investments before taxes totaled $9.8 million in the fourth quarter of 2023 compared to $0.3 million in the fourth quarter of 2022. Net investment income was $14.2 million in the fourth quarter of 2023 compared to $4.0 million in the fourth quarter of 2022. Net investment income included limited partnership losses of $0.6 million in the fourth quarter of 2023 compared to $8.3 million in the fourth quarter of 2022. Net realized and unrealized gains on investments were $3.4 million in the fourth quarter of 2023 compared to losses of $3.5 million in the fourth quarter of 2022. Net impairment losses recognized in earnings were $7.8 million in the fourth quarter of 2023 compared to $0.2 million in the fourth quarter of 2022.
Webcast Information
Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on February 27, 2024. 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 12th largest homeowners insurer, 12th 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, including technological innovations;
- dependence upon the independent agency system; and
- ability to maintain our brand, including 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 economic or social 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 subscribers at 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;
- compliance with complex and evolving laws and regulations and outcome of pending and potential litigation;
- factors affecting the quality and liquidity of our investment portfolio; and
- 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.
Erie Indemnity Company Statements of Operations (dollars in thousands, except per share data) | ||||||||
Three months ended | Twelve months ended | |||||||
2023 | 2022 | 2023 | 2022 | |||||
(Unaudited) | ||||||||
Operating revenue | ||||||||
Management fee revenue - policy issuance and renewal services | $ 601,595 | $ 503,633 | $ 2,442,073 | $ 2,087,846 | ||||
Management fee revenue - administrative services | 16,693 | 14,877 | 63,669 | 58,323 | ||||
Administrative services reimbursement revenue | 192,728 | 175,613 | 737,139 | 668,268 | ||||
Service agreement revenue | 6,651 | 6,512 | 26,059 | 25,687 | ||||
Total operating revenue | 817,667 | 700,635 | 3,268,940 | 2,840,124 | ||||
Operating expenses | ||||||||
Cost of operations - policy issuance and renewal services | 497,855 | 443,592 | 2,011,545 | 1,795,642 | ||||
Cost of operations - administrative services | 192,728 | 175,613 | 737,139 | 668,268 | ||||
Total operating expenses | 690,583 | 619,205 | 2,748,684 | 2,463,910 | ||||
Operating income | 127,084 | 81,430 | 520,256 | 376,214 | ||||
Investment income | ||||||||
Net investment income | 14,212 | 3,979 | 44,572 | 28,585 | ||||
Net realized and unrealized investment gains (losses) | 3,408 | (3,453) | (5,838) | (27,286) | ||||
Net impairment losses recognized in earnings | (7,849) | (238) | (9,766) | (667) | ||||
Total investment income | 9,771 | 288 | 28,968 | 632 | ||||
Interest expense | — | — | — | 2,009 | ||||
Other income | 3,069 | 243 | 12,712 | 1,615 | ||||
Income before income taxes | 139,924 | 81,961 | 561,936 | 376,452 | ||||
Income tax expense | 28,996 | 16,471 | 115,875 | 77,883 | ||||
Net income | $ 110,928 | $ 65,490 | $ 446,061 | $ 298,569 | ||||
Earnings Per Share | ||||||||
Net income per share | ||||||||
Class A common stock – basic | $ 2.38 | $ 1.41 | $ 9.58 | $ 6.41 | ||||
Class A common stock – diluted | $ 2.12 | $ 1.25 | $ 8.53 | $ 5.71 | ||||
Class B common stock – basic and diluted | $ 357 | $ 211 | $ 1,437 | $ 962 | ||||
Weighted average shares outstanding – Basic | ||||||||
Class A common stock | 46,189,041 | 46,189,028 | 46,188,981 | 46,188,916 | ||||
Class B common stock | 2,542 | 2,542 | 2,542 | 2,542 | ||||
Weighted average shares outstanding – Diluted | ||||||||
Class A common stock | 52,301,676 | 52,298,903 | 52,299,411 | 52,297,990 | ||||
Class B common stock | 2,542 | 2,542 | 2,542 | 2,542 | ||||
Dividends declared per share | ||||||||
Class A common stock | $ 1.275 | $ 1.190 | $ 4.845 | $ 4.520 | ||||
Class B common stock | $ 191.25 | $ 178.50 | $ 726.75 | $ 678.00 | ||||
Erie Indemnity Company Statements of Financial Position (in thousands) | ||||
December 31, 2023 | December 31, 2022 | |||
Assets | ||||
Current assets: | ||||
Cash and cash equivalents (includes restricted cash of $12,542 and $11,932, respectively) | $ 144,055 | $ 142,090 | ||
Available-for-sale securities | 82,017 | 24,267 | ||
Receivables from Erie Insurance Exchange and affiliates, net | 625,338 | 524,937 | ||
Prepaid expenses and other current assets | 69,321 | 79,201 | ||
Accrued investment income | 9,458 | 8,301 | ||
Total current assets | 930,189 | 778,796 | ||
Available-for-sale securities, net | 879,224 | 870,394 | ||
Equity securities | 84,253 | 72,560 | ||
Fixed assets, net | 442,610 | 413,874 | ||
Agent loans, net | 58,434 | 60,537 | ||
Defined benefit pension plan | 34,320 | 0 | ||
Other assets, net | 42,934 | 43,295 | ||
Total assets | $ 2,471,964 | $ 2,239,456 | ||
Liabilities and shareholders' equity | ||||
Current liabilities: | ||||
Commissions payable | $ 353,709 | $ 300,028 | ||
Agent incentive compensation | 68,077 | 95,166 | ||
Accounts payable and accrued liabilities | 175,622 | 165,915 | ||
Dividends payable | 59,377 | 55,419 | ||
Contract liability | 41,210 | 36,547 | ||
Deferred executive compensation | 10,982 | 12,036 | ||
Total current liabilities | 708,977 | 665,111 | ||
Defined benefit pension plans | 26,260 | 51,224 | ||
Contract liability | 19,910 | 17,895 | ||
Deferred executive compensation | 20,936 | 13,724 | ||
Deferred income taxes, net | 11,481 | 14,075 | ||
Other long-term liabilities | 21,565 | 29,019 | ||
Total liabilities | 809,129 | 791,048 | ||
Shareholders' equity | 1,662,835 | 1,448,408 | ||
Total liabilities and shareholders' equity | $ 2,471,964 | $ 2,239,456 | ||
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SOURCE Erie Indemnity Company