Q1 2025 Erie Indemnity Co Earnings Call
<unk> the recording.
Scott: Now I'd like to introduce your host for the call Vice President of Investor Relations Scott <unk>.
Speaker Change: Thank you and welcome everyone.
Scott: We appreciate you joining us for this recorded discussion about our first quarter results.
Speaker Change: This recording will include remarks from Tinder Castro, President and Chief Executive Officer, and Julie Koski, Executive Vice President and Chief Financial Officer.
Thank you for joining us today, and we'll see you in the next video.
Speaker Change: Our earnings release and financial supplement were issued yesterday afternoon. After the market close and are available within the Investor Relations section of our website using insurance Dot com.
Speaker Change: Before we begin I would like to remind everyone that today's discussions may contain forward looking remarks that reflect the company's current views about future events.
Speaker Change: These remarks are based on assumptions and known unexpected.
Thank you for watching!
Speaker Change: Risks and uncertainties.
Speaker Change: And uncertainties may cause results to differ materially from those described in these remarks.
Speaker Change: For information on important factors may cause such differences. Please see the safe Harbor statement in our Form 10-Q filing with the SEC filed yesterday and in the related press release.
Speaker Change: This prerecorded call is the property the indemnity company it may not be reproduced or rebroadcast by any other party without the prior written consent of your indemnity company.
Tim: With that we'll move on to Tim's remarks, Tim.
Tim: Thanks, Scott and thanks to all of you for joining us today.
Tim: Before we dive into our first quarter results I'd like to take a moment to acknowledge the truly historic milestone for your insurance.
Tim: A few days ago on April 20th we Mark the 100 <unk> anniversary of our company's founding.
Tim: And I reflect on this milestone it's amazing to think about the impact. This company has had over the past century.
Tim: Protection and peace of mind for millions of policyholders, they build successful careers with tens of thousands of employees and agents.
Tim: <unk> of dollars and thousands of hours of time contributed to our communities and the century of innovation resilience and service.
It's an extraordinary achievement that speaks to the strong foundation that we built 100 years ago, and our commitment to the values and business principles of our founders.
Tim: Similarly, we've been celebrating this milestone was released the connect to those values.
Speaker Change: Good morning and welcome to the Erie Indemnity Company first quarter 2025 earnings conference call. This call was pre-recorded and there will be no question answer session following the recording. Now I'd like to introduce your host for the call, Vice President of Investment Relations, Scott Beilharz.
Tim: Last month, we provided each employee $100 to contribute to a charity of their choice.
Tim: So far nearly half a million dollars has been allocated to various nonprofits across our geographic footprint.
Tim: Of course, if we look back to what brought US here. We're also focused on what's ahead.
Tim: We're taking actions to remain competitive in this complex and constantly evolving business landscape.
Tim: And I'm confident in the strategic approach, we're taking to long term growth and stability.
Speaker Change: With that I'd like to turn it over to Chief Financial Officer, Julie Pell Koski to share details on our first quarter financial performance.
Tim: Sure.
Tim: Thank you, Tim and good morning, everyone.
Tim: Tim mentioned this past week Erie insurance celebrated a significant achievement.
Tim: Antonio celebration.
Tim: 100 years Erie has operated with a focus of being above all in survey a timeless differentiator from our competitors.
Tim: Our foundation of financial strength, and keeping the human touch at the center of everything we do has helped us to navigate countless challenges and weather many ups and downs, particularly in more difficult times, such as significant weather events and uncertain economic and market conditions.
Tim: So let's start by discussing the first quarter performance of the Erie insurance exchange the insurance operation we manage.
Tim: With significant rate increases implemented in 2023, and 2024 continue to drive the exchanges direct written premium growth.
Direct and assumed written premiums grew by nearly 14% in the first quarter of 2025 compared to the prior year.
Tim: The rate impact as evidenced in the increase in our average premium per policy at 13, 2%.
Speaker Change: 100, <unk> anniversary of our company's founding.
Speaker Change: When I reflect on this milestone it's amazing to think about the impact. This company has had over the past century.
Tim: Now that our rates are at more adequate level, we're seeing the impact of the increased competitiveness of those rates.
Speaker Change: Protection and peace of mind for millions of policyholders, they build successful careers for tens of thousands of employees and agents.
Tim: Policies in force grew three 2% in the first quarter of 2025 compared to the first quarter of 2024, which is lower than four 8% for the total year 2024, but more in line with growth experienced prior to pandemic related disruption.
Speaker Change: Use of dollars and thousands of hours of time.
Speaker Change: Related to our communities.
Speaker Change: We have innovation resilience.
Speaker Change: Airbus.
Speaker Change: It's an extraordinary achievement that speaks to the strong foundation that we built 100 years ago, and our commitment to the values and business principles of our founders.
Tim: Our policy retention ratio decreased slightly to 89, 9%.
Tim: The significant rate actions Ive mentioned were the primary lever were pulling on to improve the profitability of the exchange we continue to see improvement in our non catastrophe loss ratio for the exchange.
Speaker Change: Fittingly, we will celebrate this milestone was released to connect to those values.
Speaker Change: Last month, we provided each employee.
Speaker Change: To contribute to a charity of their choice.
Speaker Change: So far nearly half a million dollars has been allocated to very soon profits across our geographic footprint.
Tim: Over in March 2025, we experienced a significant catastrophe loss that contributed 13 points to the exchanges total first quarter catastrophe losses of over 16 points.
Speaker Change: Of course, if you look back what brought US here. We're also focused on what's ahead.
We're taking actions to remain competitive in this complex and constantly evolving business.
Tim: This drove the increase in our first quarter combined ratio.
Speaker Change: And I'm confident in the strategic approach, we're taking a long term growth and stability.
Tim: The exchanges first quarter combined ratio was 108, 1% an increase over 106% in the first quarter of 2024.
Speaker Change: With that I'd like to turn it over to Chief Financial Officer, who will tell Cassidy to share details on our first quarter performance.
Tim: As you can see in the Investor supplement that was published yesterday on our website, if we excluded catastrophe losses as well as the effects of prior accident year Reserve development, our direct current year non catastrophe loss ratio would have been 95, 4% in the first quarter of 2025.
Cassidy: Thank you, Tim and good morning, everyone.
Speaker Change: As Tim mentioned this past week Erie insurance celebrated a significant achievement at Centennial celebration.
Speaker Change: 100 years Erie has operated with a focus of being above all in service of timeless differentiator from our competitors.
Speaker Change: Our foundation of financial strength, and keeping the human touch at the center of everything we do just helped us to navigate countless challenges and weather many ups and downs, particularly in more difficult times, such as significant weather events and uncertain economic and market conditions.
Tim: The exchanges underwriting losses in the first quarter were partially offset by investment returns, which resulted in a slight decrease in policyholder surplus from $9 3 billion at December of 2024 to $9 2 billion at March 2025.
Tim: Shifting to the results for indemnity net income was $138 4 million or $2 65 per diluted share in the first quarter of 2025 compared to $124 6 million or $2 38 per diluted share in the first quarter of 2024.
Speaker Change: So let's start by discussing the first quarter performance of the Erie insurance exchange the insurance operations, we manage.
Speaker Change: The significant rate increases implemented in 2023, and 'twenty 'twenty four continue to drive the exchanges direct written premium growth.
Speaker Change: Direct and assumed written premiums grew by nearly 14% in the first quarter of 2025 compared to the prior year.
Tim: Operating income increased 9% to more than 151 million for the first quarter of 2025 compared to the first quarter of 2024.
The rate impact is evident in the increase in our average premium per policy of 13, 2%.
Tim: Management fee revenue from policy issuance and renewal services increased over 13% to 755 million in the first quarter of 2025 compared to the prior year.
Speaker Change: Now that our rates are at more adequate level, we're seeing the impact of the increased competitiveness of those right.
Speaker Change: Policies in force grew three 2% in the first quarter of 2025 compared to the first quarter of 2024, which is lower than four 8% for the total year 2024, but more in line with growth experienced prior to pandemic related disruption.
Tim: The total cost of operations from policy issuance and renewal services increased $77 million or about 14% for the first quarter of 2025 compared to the same period in 2024.
Speaker Change: Our policy retention ratio decreased slightly to 89, 9%.
Tim: Our largest expense our commissions grew $61 million or about 16% for the first quarter.
Speaker Change: The significant rate actions Ive mentioned were the primary lever we're pulling on to improve the profitability of the exchange we continue to see improvement in our non catastrophe loss ratio for the exchange.
Tim: This growth was driven by the increase in direct written premiums of the exchange and to a lesser extent agent incentive compensation.
Tim: Non commission expenses for the first quarter grew just over $16 million or about 9%.
Speaker Change: Over in March 2025, we experienced a significant catastrophe loss that contributed 13 points to the <unk>.
Tim: The biggest driver of this growth was an $11 million increase in our technology investments due to higher hardware software and personnel costs as well as a decrease in the amount of professional fees capitalized.
Speaker Change: Changes total first quarter catastrophe losses of over 16 points.
Speaker Change: Drove the increase in our first quarter combined ratio.
Speaker Change: The exchange's first quarter combined ratio was 108, 1% an increase over 106% in the first quarter of 2024.
Tim: We also saw an increase in underwriting and policy processing costs of $3 million and customer service costs of about $2 million.
Tim: Personnel cost increases across all expense categories were impacted by increased compensation in the first quarter of 2025, including higher estimates for incentive plan awards compared to 2024.
As you can see in the Investor supplement that was published yesterday on our website, if we excluded catastrophe losses as well as the effects of prior accident year Reserve development, our direct current year non catastrophe loss ratio would have been 95, 4% in the first quarter of 2025.
Tim: When looking at our investment operations. It is important to note that during periods of heightened market uncertainty. We have always maintained a long term perspective, and a focus on our strategic objectives for the Erie insurance group portfolio.
Speaker Change: Exchanges underwriting losses in the first quarter were partially offset by investment returns, which resulted in a slight decrease in policyholder surplus from $9 3 billion at December of 'twenty, three four to $9 2 billion at March 2025.
Tim: Investment income in the first quarter of 2025 was $19 5 million compared to $15 million in the same period of 2024, driven by growth in our net investment income of $4 million.
Speaker Change: Shifting to the results for indemnity net income was $138 4 million or $2 65 per diluted share in the first quarter of 2025 compared to $124 6 million or $2 38 per diluted share in the first quarter of 2024.
Tim: As always we take a measured approach to capital management, and we maintain a strong balance sheet and for the first three months of 2025, our financial performance has enabled us to pay our shareholders almost $64 million in dividends.
Speaker Change: With that I'll turn the call back over to Tim Tim.
Speaker Change: Operating income increased 9% to more than 151 million for the first quarter of 2020, but compared to the first quarter 2024.
Tim: Thanks Julie.
Tim: The entire insurance industry is feeling the effects of external pressures related economic instability, the dynamic political environment and an increase in severe weather.
Speaker Change: Management fee revenue from policy issuance and renewal services increased over 13% to 755 million in the first quarter of 2025 compared to the prior year.
Tim: Results truly just reported however, confirm that we're responding appropriately and effectively setting the stage to address the immediate challenges ahead bill.
Tim: Long term sustainability for both the company and for our regions.
Speaker Change: The total cost of operations from policy issuance and renewal services increased $77 million or about 14% for the first quarter 2025 compared to the same period in 2024.
Tim: Key part of our response to both technologies.
Past calls we've talked about our progress in modernizing our legacy platforms.
Tim: One of the more significant achievements over the past quarter was the continued rollout. This is volume two bravo.
Speaker Change: Our largest expense our commissions grew $61 million or about 16% for the first quarter.
Tim: After a pilot in Indiana in the second half of last year, the products will be released to Ohio, Wisconsin, Illinois, and Tennessee in late January.
Speaker Change: This growth was driven by the increase in direct written premiums of the exchange and to a lesser extent agent incentive compensation.
Tim: This is auto <unk> supports our refreshed and enhanced business auto product with an improved quoting and processing experience and the ability to have vehicles from multiple speeds on one policy.
Speaker Change: Non commission expenses for the first quarter grew just over $16 million or about 9%.
Speaker Change: The biggest driver of this growth was an $11 million increase in our technology investments due to higher hardware software and personnel costs as well as a decrease in the amount of professional fees capitalized.
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Tim: Rollout through the remainder of our footprint is expected to continue through the third quarter.
Tim: Our monetization efforts are wide scale and ongoing so you can be sure to hear more updates on our progress in upcoming calls.
Speaker Change: We also saw an increase in underwriting and policy processing costs of $3 million and customer service costs of about $2 million.
Tim: As Julie detailed earlier, we've experienced some very cost of claims already this year the losses incurred from distribution forms throughout our footprint emerge as even surpass those of her key beliefs September storm, with Florida, southeast, causing widespread destruction and fatalities.
Speaker Change: Personnel cost increases across all expense categories were impacted by increased compensation in the first quarter of 2025, including higher estimate for incentive plan award compared to 23 four.
Speaker Change: When looking at our investment operations. It is important to note that during periods of heightened market uncertainty. We have always maintained a long term perspective, and our focus on our strategic objectives for the Erie insurance group portfolio.
Tim: Distributions like these are devastating to our customers and damages or profitability.
Tim: The JV circumstances, but our biggest strength exceptional service really shines through.
Tim: When I reflect on where we are today celebrating 100 years in business I'm proud that <unk> kept our promise to service at the forefront of everything we do.
Speaker Change: Investment income in the first quarter of 2025 was $19 5 million compared to $15 million in the same period, a 23 four driven by growth in our net investment income of $4 million.
Tim: And I'm excited to begin our second century of service and success.
Tim: Thank you all for joining us today and for your continued interest in years.
Speaker Change: As always we take a measured approach to capital management, and we maintain a strong balance sheet and for the first three months of 2025, our financial performance has enabled us to pay our shareholders almost $64 million in dividends.
Tim: With that I'll turn the call back over to Tim Tim.
Tim: Thanks Julie.
Tim: The entire insurance industry is feeling the effects of external pressures related to economic instability, the dynamic political environment and an increase in severe weather.
Tim: The results can we just reported however, confirm that we're responding appropriately and effectively setting the stage to address the immediate challenges ahead and to build long term sustainability for both the company and for our agents.
Tim: A key part of our response involves technology <unk>.
Tim: In past calls we've talked about our progress in modernizing our legacy platforms.
Tim: One of the more significant achievements over the past quarter was the continued rollout business model to go though.
Tim: After a pilot in Indiana in the second half of last year, the product will be released to Ohio, Wisconsin, Illinois, and Tennessee in late January.
Tim: This is auto <unk> supports our refreshed and enhanced business auto product with an improved quoting your processing experience and the ability to have vehicles from multiple states are one policy.
Tim: It also provides access to online account for customers and features of IOP option.
Tim: Rollout to the remainder of our footprint is expected to continue through the third quarter.
Tim: Our monetization efforts are wide scale and ongoing so you can be sure to hear more updates on our progress in coming calls.
Tim: As Julie detailed earlier, we've experienced some very cost of claims already this year the losses incurred from the severe storms throughout our footprint and merge with <unk>.
Tim: Surpass those of Erkki Buoyed September storm that flooded the southeast, causing widespread destruction and fatalities.
Tim: <unk> like these are devastating to our customers and damaging to our profitability.
Tim: In these circumstances that our biggest spring exceptional service really shines through.
Tim: When I reflect on where we are today celebrating 100 years in business I am proud that <unk> kept our promise of service at the forefront of everything we do.
Tim: And I'm excited to begin our second century of service and success.
Tim: Thank you all for joining us today and for your <unk>.
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Tim: [music].