Document

Pennsylvania

(State or other jurisdiction

(Commission

(IRS Employer

of incorporation)

File Number)

Identification No.)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



Date of Report (Date of Earliest Event Reported):	February 27, 2020



	ERIE INDEMNITY COMPANY
	(Exact name of registrant as specified in its charter)



Registrant’s telephone number, including area code:	814	870-2000



	Not applicable
	Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:



Class A common stock,	stated value $0.0292 per share	ERIE	NASDAQ Stock Market, LLC
(Title of each class)		(Trading Symbol)	(Name of each exchange on which registered)

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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Item 2.02 Results of Operations and Financial Condition.

On February 27, 2020, Erie Indemnity Company (the "Company") issued a press release announcing financial results for the quarter and year ended December 31, 2019. Copies of the press release and financial information are attached hereto and are incorporated herein by reference as Exhibit 99.1 and Exhibit 99.2, respectively.

On February 28, 2020 at 10:00 a.m. the Company will provide a pre-recorded Webcast that is complimentary to the press release announcing financial results for the quarter and year ended December 31, 2019.

Item 8.01 Other Events.

At its meeting on February 20, 2020, the Company's Board of Directors approved the following quarterly dividend on shares of Erie Indemnity Company Class A common stock:

Dividend Number: 358

Class A Rate Per Share: $0.965

Declaration Date: February 20, 2020

Ex-Dividend Date: April 3, 2020

Record Date: April 6, 2020

Payable Date: April 21, 2020

Item 9.01 Financial Statements and Exhibits.

Exhibit 99.1 Press Release

Exhibit 99.2 Financial Information

Exhibit 104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

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Exhibit Index




Exhibit No.		Description

99.1		Press Release
99.2		Financial Information
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.




	Erie Indemnity Company

February 27, 2020	By:	/s/ Gregory J. Gutting

		Name: Gregory J. Gutting
		Title: Executive Vice President & CFO

Exhibit 99.1

Erie Indemnity Reports Full Year and Fourth Quarter 2019 Results

Net Income per Diluted Share up 9.9 percent in 2019

Erie, Pa. - February 27, 2020 - Erie Indemnity Company (NASDAQ: ERIE) today announced financial results for the full year and quarter ending December 31, 2019. Net income was $316.8 million, or $6.06 per diluted share, in 2019, compared to $288.2 million, or $5.51 per diluted share, in 2018. Net income was $59.6 million, or $1.14 per diluted share, in the fourth quarter of 2019, compared to $62.3 million, or $1.19 per diluted share, in the fourth quarter of 2018.



4Q and Full Year 2019
(dollars in thousands)	4Q'19			4Q'18			2019		2018
Operating income	$	68,700		$	74,758		$	357,339	$	344,343
Investment income	6,914			4,995			39,967		25,796
Interest expense and other (income), net	(36		)	(2,889		)	601		(1,181		)
Income before income taxes	75,650			82,642			396,705		371,320
Income tax expense	16,063			20,328			79,884		83,096
Net income	$	59,587		$	62,314		$	316,821	$	288,224

2019 Full Year Highlights

Operating income before taxes increased $13.0 million, or 3.8 percent, in 2019 compared to 2018.


•	Management fee revenue - policy issuance and renewal services increased $90.9 million, or 5.3 percent, in 2019 compared to 2018.


•	Management fee revenue allocated to administrative services increased $3.6 million, or 6.7 percent, in 2019 compared to 2018.


•	Cost of operations - policy issuance and renewal services


–	Commissions increased $40.9 million in 2019 compared to 2018 as a result of the 5.2 percent increase in direct and affiliated assumed premiums written by the Exchange, somewhat offset by lower agent incentive costs related to less profitable growth.

–

Non-commission expense increased $39.5 million in 2019 compared to 2018. Underwriting and policy processing costs increased $5.7 million primarily due to increased underwriting report costs and other policy acquisition costs. Information technology costs increased $23.1 million primarily due to increased professional fees and hardware and software costs. Sales and advertising costs decreased $3.2 million due to decreased personnel costs. Customer service costs increased $2.9 million primarily due to increased credit card processing fees and personnel costs. Administrative and other expenses increased $11.1 million primarily driven by an increase in long-term incentive plan costs due to a higher

company stock price in 2019 compared to 2018 and several multi-year commitments made to support community development initiatives. Personnel costs in all expense categories were impacted by increased medical expenses, somewhat offset by lower estimated costs for incentive plans related to sales and underwriting performance in 2019 compared to targets.


•	The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $582.0 million in 2019 and $580.3 million in 2018, but had no net impact on operating income.

Income from investments before taxes totaled $40.0 million in 2019 compared to $25.8 million in 2018. Net realized gains on investments were $6.1 million in 2019 compared to net realized losses of $2.0 million in 2018. Net investment income was $33.4 million in 2019 compared to $30.2 million in 2018.



4Q 2019 Highlights

Operating income before taxes decreased $6.1 million, or 8.1 percent, in the fourth quarter of 2019 compared to the fourth quarter of 2018.


•	Management fee revenue - policy issuance and renewal services increased $16.9 million, or 4.1 percent, in the fourth quarter of 2019 compared to the fourth quarter of 2018.


•	Management fee revenue allocated to administrative services increased $0.9 million, or 6.5 percent in the fourth quarter of 2019 compared to the fourth quarter of 2018.


•	Cost of operations - policy issuance and renewal services


–	Commissions increased $10.1 million in the fourth quarter of 2019 compared to the fourth quarter of 2018 as a result of the 4.1 percent increase in direct and affiliated assumed premiums written by the Exchange.

–

Non-commission expense increased $13.2 million in the fourth quarter of 2019 compared to the fourth quarter of 2018. Underwriting and policy processing costs increased $1.8 million primarily due to increased underwriting report costs and other policy acquisition costs. Information technology costs increased $6.0 million primarily due to increased professional fees and hardware and software costs. Administrative and other expenses increased $5.0 million primarily due to increased personnel costs and several multi-year commitments made to support community development initiatives.


•	The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $150.7 million and $147.7 million in the fourth quarter of 2019 and 2018, respectively, but had no net impact on operating income.

Income from investments before taxes totaled $6.9 million in the fourth quarter of 2019 compared to $5.0 million in the fourth quarter of 2018. Net realized gains on investments were $0.6 million in the fourth quarter of 2019 compared net realized losses of $1.5 million in the fourth quarter of 2018. Net investment income was $8.2 million in the fourth quarter of 2019 compared to $8.6 million in the fourth quarter of 2018.

Webcast Information

Indemnity has scheduled a pre-recorded audio broadcast on the Web for 10:00 AM ET on February 28, 2020. 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 nearly 6 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.

***

"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;


•	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.

Exhibit 99.2

Erie Indemnity Company

Statements of Operations

(dollars in thousands, except per share data)



	Three months ended December 31,						Twelve months ended December 31,
	2019			2018			2019			2018
	(Unaudited)
Operating revenue
Management fee revenue - policy issuance and renewal services, net	$	424,534		$	407,656		$	1,810,457		$	1,719,567
Management fee revenue - administrative services, net	14,628			13,738			57,204			53,632
Administrative services reimbursement revenue	150,705			147,694			582,010			580,336
Service agreement revenue	6,873			7,380			27,627			28,677
Total operating revenue	596,740			576,468			2,477,298			2,382,212

Operating expenses
Cost of operations - policy issuance and renewal services	377,335			354,016			1,537,949			1,457,533
Cost of operations - administrative services	150,705			147,694			582,010			580,336
Total operating expenses	528,040			501,710			2,119,959			2,037,869
Operating income	68,700			74,758			357,339			344,343

Investment income
Net investment income	8,200			8,626			33,399			30,209
Net realized investment gains (losses)	602			(1,513		)	6,103			(2,010		)
Net impairment losses recognized in earnings	(2		)	(935		)	(195		)	(1,581		)
Equity in (losses) earnings of limited partnerships	(1,886		)	(1,183		)	660			(822		)
Total investment income	6,914			4,995			39,967			25,796

Interest expense, net	24			596			856			2,460
Other income	60			3,485			255			3,641
Income before income taxes	75,650			82,642			396,705			371,320
Income tax expense	16,063			20,328			79,884			83,096
Net income	$	59,587		$	62,314		$	316,821		$	288,224


Earnings Per Share
Net income per share
Class A common stock – basic	$	1.28		$	1.34		$	6.80		$	6.19
Class A common stock – diluted	$	1.14		$	1.19		$	6.06		$	5.51
Class B common stock – basic and diluted	$	192		$	201		$	1,020		$	928

Weighted average shares outstanding – Basic
Class A common stock	46,189,033			46,188,978			46,188,836			46,188,637
Class B common stock	2,542			2,542			2,542			2,542

Weighted average shares outstanding – Diluted
Class A common stock	52,327,607			52,319,918			52,319,860			52,315,213
Class B common stock	2,542			2,542			2,542			2,542

Dividends declared per share
Class A common stock	$	0.9650		$	0.9000		$	3.6650		$	3.4200
Class B common stock	$	144.750		$	135.000		$	549.750		$	513.000

Erie Indemnity Company

Statements of Financial Position

(in thousands)



	December 31, 2019		December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	336,739	$	266,417
Available-for-sale securities	32,810		402,339
Equity securities	2,381		—
Receivables from Erie Insurance Exchange and affiliates	468,636		449,873
Prepaid expenses and other current assets	44,943		36,892
Federal income taxes recoverable	462		8,162
Accrued investment income	5,433		5,263
Total current assets	891,404		1,168,946

Available-for-sale securities	697,891		346,184
Equity securities	64,752		11,853
Limited partnership investments	26,775		34,821
Fixed assets, net	221,379		130,832
Deferred income taxes, net	17,186		24,101
Other assets	96,853		61,590
Total assets	$	2,016,240	$	1,778,327

Liabilities and shareholders' equity
Current liabilities:
Commissions payable	$	262,963	$	241,573
Agent bonuses	96,053		103,462
Accounts payable and accrued liabilities	134,957		111,291
Dividends payable	44,940		41,910
Contract liability	35,938		33,854
Deferred executive compensation	10,882		13,107
Current portion of long-term borrowings	1,979		1,870
Total current liabilities	587,712		547,067

Defined benefit pension plan	145,659		116,866
Contract liability	18,435		17,873
Deferred executive compensation	13,734		13,075
Long-term borrowings	95,842		97,860
Other long-term liabilities	21,605		11,914
Total liabilities	882,987		804,655

Shareholders' equity	1,133,253		973,672
Total liabilities and shareholders' equity	$	2,016,240	$	1,778,327