ERIE, Pa., July 29, 2021 /PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the quarter and six months ending June 30, 2021. Net income was $79.0 million, or $1.51 per diluted share, in the second quarter of 2021, compared to $82.0 million, or $1.57 per diluted share, in the second quarter of 2020. Net income was $152.6 million, or $2.92 per diluted share, in the first six months of 2021, compared to $141.3 million, or $2.70 per diluted share, in the first six months of 2020.

The uncertainty resulting from the COVID-19 pandemic continues to evolve and the pandemic's ultimate impact and duration remain uncertain at this time.

2Q and First Half 2021
(in thousands)	2Q'21		2Q'20		1H21		1H20
Operating income	$	85,065	$	91,189	$	161,160	$	176,880
Investment income	16,418		11,553		34,406		2,358
Interest and other expense, net	1,587		260		3,115		629
Income before income taxes	99,896		102,482		192,451		178,609
Income tax expense	20,867		20,505		39,856		37,306
Net income	$	79,029	$	81,977	$	152,595	$	141,303

2Q 2021 Highlights

Operating income before taxes decreased $6.1 million, or 6.7 percent, in the second quarter of 2021 compared to the second quarter of 2020.

Management fee revenue - policy issuance and renewal services increased $18.5 million, or 3.8 percent, in the second quarter of 2021 compared to the second quarter of 2020.
Management fee revenue - administrative services decreased $0.1 million, or 1.0 percent, in the second quarter of 2021 compared to the second quarter of 2020.
Cost of operations - policy issuance and renewal services

Commissions increased $14.7 million in the second quarter of 2021 compared to the second quarter of 2020, driven by the growth in direct and affiliated assumed written premium, primarily in lines of business that pay a higher commission rate. To a lesser extent, there was also an increase in agent incentive compensation for the second quarter of 2021 compared to the second quarter of 2020.
Non-commission expense increased $9.2 million in the second quarter of 2021 compared to the second quarter of 2020. Underwriting and policy processing expense increased $3.3 million primarily due to increased personnel costs and underwriting report costs. Information technology costs increased $2.9 million primarily due to increased hardware and software costs as well as increased personnel costs. Administrative and other costs increased $3.6 million primarily driven by increased building and equipment depreciation and professional fees in the second quarter of 2021 compared to the same period in 2020. Personnel costs in all expense categories for the second quarter of 2021 were impacted by higher medical costs compared to the prior year as the COVID-19 pandemic reduced elective procedures in 2020.

Income from investments before taxes totaled $16.4 million in the second quarter of 2021 compared to $11.6 million in the second quarter of 2020. Net investment income was $13.7 million in the second quarter of 2021 compared to $5.0 million in the second quarter of 2020. Included in net investment income is $6.2 million of limited partnership earnings in the second quarter of 2021 and $2.3 million of limited partnership losses in the second quarter of 2020. Net realized gains on investments were $2.8 million in the second quarter of 2021 compared to $6.5 million in the second quarter of 2020.

First Half 2021 Highlights

Operating income before taxes decreased $15.7 million, or 8.9 percent, in the first six months of 2021 compared to the first six months of 2020.

Management fee revenue - policy issuance and renewal services increased $30.4 million, or 3.3 percent, in the first six months of 2021 compared to the first six months of 2020.
Management fee revenue - administrative services decreased $0.1 million, or 0.2 percent, in the first six months of 2021 compared to the first six months of 2020.
Cost of operations - policy issuance and renewal services

Commissions increased $24.1 million in the first six months of 2021 compared to the first six months of 2020, driven by the growth in direct and affiliated assumed written premium, primarily in lines of business that pay a higher commission rate. To a lesser extent, there was also an increase in agent incentive compensation for the first six months 2021 compared to the first six months of 2020.
Non-commission expense increased $20.8 million for the six months ended June 30, 2021 compared to the same period in 2020. Underwriting and policy processing costs increased $2.5 million primarily due to increased underwriting report costs and personnel costs. Information technology costs increased $7.2 million primarily due to increased hardware and software costs and personnel costs. Administrative and other costs increased $12.1 million primarily driven by increased personnel costs and professional fees compared to the same period in 2020. Personnel costs in all expense categories were impacted by higher pension costs and higher medical costs compared to the prior year as the COVID-19 pandemic reduced elective procedures in 2020.

Income from investments before taxes totaled $34.4 million in the first six months of 2021 compared to $2.4 million in the first six months of 2020. Net investment income was $30.7 million in the first six months of 2021 compared to $9.7 million in the first six months of 2020. Included in net investment income is $15.2 million of limited partnership earnings in the first six months of 2021 and $6.0 million of limited partnership losses in the first six months of 2020. Net realized gains on investments were $3.6 million in the first six months of 2021 compared to net realized losses of $4.3 million in the first six months of 2020.

Webcast Information

Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on July 30, 2021. 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 12^th largest homeowners insurer, 13^th 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 16th 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 about Erie Insurance Group are available at www.erieinsurance.com.

"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; an
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;
emerging claims and coverage issues in the industry; and
severe weather conditions or other catastrophic losses, including terrorism;

potential impacts of the COVID-19 pandemic on the growth and financial condition of the Exchange;
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;
potential impacts of the COVID-19 pandemic on our operations, the business operations of our customers and/or independent agents, or our third-party vendor operations;
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.

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

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
	(Unaudited)				(Unaudited)
Operating revenue
Management fee revenue - policy issuance and renewal services	$	502,271	$	483,795	$	957,989	$	927,545
Management fee revenue - administrative services	14,667		14,813		29,514		29,584
Administrative services reimbursement revenue	157,190		151,965		310,723		303,519
Service agreement revenue	5,902		6,446		11,981		13,108
Total operating revenue	680,030		657,019		1,310,207		1,273,756

Operating expenses
Cost of operations - policy issuance and renewal services	437,775		413,865		838,324		793,357
Cost of operations - administrative services	157,190		151,965		310,723		303,519
Total operating expenses	594,965		565,830		1,149,047		1,096,876
Operating income	85,065		91,189		161,160		176,880

Investment income
Net investment income	13,650		5,044		30,747		9,708
Net realized investment gains (losses)	2,769		6,526		3,573		(4,280)
Net impairment (losses) recoveries recognized in earnings	(1)		(17)		86		(3,070)
Total investment income	16,418		11,553		34,406		2,358

Interest expense, net	1,039		2		2,048		5
Other expense	548		258		1,067		624
Income before income taxes	99,896		102,482		192,451		178,609
Income tax expense	20,867		20,505		39,856		37,306
Net income	$	79,029	$	81,977	$	152,595	$	141,303

Net income per share
Class A common stock – basic	$	1.70	$	1.76	$	3.28	$	3.03
Class A common stock – diluted	$	1.51	$	1.57	$	2.92	$	2.70
Class B common stock – basic and diluted	$	255	$	264	$	491	$	455

Weighted average shares outstanding – Basic
Class A common stock	46,188,289		46,187,808		46,188,573		46,188,299
Class B common stock	2,542		2,542		2,542		2,542

Weighted average shares outstanding – Diluted
Class A common stock	52,302,370		52,302,981		52,309,163		52,313,667
Class B common stock	2,542		2,542		2,542		2,542

Dividends declared per share
Class A common stock	$	1.035	$	0.965	$	2.070	$	1.930
Class B common stock	$	155.25	$	144.75	$	310.50	$	289.50

Erie Indemnity Company
Statements of Financial Position
(in thousands)

	June 30, 2021		December 31, 2020
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	156,038	$	161,240
Available-for-sale securities	20,856		17,697
Equity securities	207		19
Receivables from Erie Insurance Exchange and affiliates, net	504,013		494,637
Prepaid expenses and other current assets	59,574		52,561
Accrued investment income	6,121		6,146
Total current assets	746,809		732,300

Available-for-sale securities, net	915,942		910,539
Equity securities	93,798		94,071
Fixed assets, net	280,402		265,341
Agent loans, net	60,070		62,449
Deferred income taxes, net	17,971		12,341
Other assets	48,652		40,081
Total assets	$	2,163,644	$	2,117,122

Liabilities and shareholders' equity
Current liabilities:
Commissions payable	$	284,234	$	262,338
Agent bonuses	62,694		110,158
Accounts payable and accrued liabilities	150,346		150,706
Dividends payable	48,200		48,200
Contract liability	35,742		36,917
Deferred executive compensation	8,581		17,319
Current portion of long-term borrowings	2,064		2,031
Total current liabilities	591,861		627,669

Defined benefit pension plans	184,111		164,346
Long-term borrowings	92,795		93,833
Contract liability	18,135		18,878
Deferred executive compensation	13,773		14,904
Other long-term liabilities	17,867		9,444
Total liabilities	918,542		929,074

Shareholders' equity	1,245,102		1,188,048
Total liabilities and shareholders' equity	$	2,163,644	$	2,117,122

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SOURCE Erie Indemnity Company