11:59 AM EDT, 10/18/2024 (MT Newswires) -- (Updates with Erie's response in the fourth and fifth paragraphs.)

Erie Indemnity ( ERIE ) shares face a potential downside risk of 35% to 55% amid concerns about the sustainability of its 25% management fee collected on Erie Insurance Exchange-written premiums, short seller Spruce Point Capital Management said Friday.

"Given the recent deterioration of the Exchange's financial performance... we believe it is increasingly likely that Erie's management fee will decline for the first time in decades which could reset earnings expectations by approximately 20% and slow premium growth at the Exchange over the coming years," Spruce Point said.

Spruce Point added that aside from the possibility of an impending management fee cut, it has other concerns with the company, such as AM Best's revision of its outlook for Erie Insurance Group's members to negative from stable in August.

Matthew Cummings of Erie Insurance told MT Newswires that the company continues to be confident in its financial strength.

"Our impressive growth and industry leading customer retention serve as a testament to the service and stability that has set us apart for nearly 100 years," Cummings said. "We're pleased with the success we've achieved and the strong value proposition we continue to offer agents, customers, employees and the communities we serve."

Price: 483.95, Change: +0.90, Percent Change: +0.19