Erie Indemnity Reports Third Quarter 2019 Results

ERIE, Pa., Oct. 24, 2019 /PRNewswire/ -- Erie Indemnity Company 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.

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.

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.

Erie Insurance Group
According to A.M. Best Company, Erie Insurance Group, based in Erie, Pennsylvania, is the 9^th largest homeowners insurer and 12^th largest automobile insurer in the United States based on direct premiums written and the 16^th largest property/casualty insurer in the United States based on total lines net premium written.  The Group, rated A+ (Superior) by A.M. Best Company, has more than 5 million policies in force and operates in 12 states and the District of Columbia. Erie Insurance Group is a FORTUNE 500 company.

News releases and more information about Erie Insurance Group are available 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 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;
• 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;
• credit risk from the Exchange;
• 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;
• factors affecting the quality and liquidity of our investment portfolio;
• our ability to meet liquidity needs and access capital; and
• outcome of pending and potential litigation.

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.

SOURCE Erie Indemnity Company