Erie Indemnity 3nd Quarter 2026 Conference Call and Webcast - ERIE INDEMNITY CO

Financial Performance:

• Third quarter 2026 net income was $182 million ($3.48/share), compared to $183 million ($3.50/share) in Q3 2025; year-to-date (YTD) net income reached $513 million ($9.80/share) versus $496 million ($9.48/share).
• Operating income decreased 0.7% to $207 million in Q3 but increased 3.4% to $578 million YTD.
• Erie Insurance Exchange direct written premium grew 1.8% in Q3 (vs. 7.6% in 2025); policies enrolled decreased 1.9%, while average premium per policy rose 5.4%.
• Exchange combined ratio worsened to 105% in Q3 (from 100.6% in 2025) due to catastrophe losses; however, YTD combined ratio improved to 102.8% (from 108.5%).
• Catastrophe losses contributed 14.1 points to the Q3 combined ratio, compared to 3.0 points in Q3 2025.
• Non-catastrophe loss ratio was 90.8% in Q3 and 91.3% YTD (2026), significantly improved from 98.1% and 96.2% respectively in 2025.
• Policyholder surplus increased to $10.7 billion as of September, up over $600 million from year-end 2025.
• Management fee revenue grew 2.6% in Q3 and 3.8% YTD; commission expenses rose 5.2% in Q3 and 7.1% YTD due to agent incentives and premium growth.
• Investment income was $20 million in Q3 and $65 million YTD, driven by higher yields and balances.
• Shareholders received approximately $204 million in dividends during the first nine months of 2026.

Guidance and Future Outlook:

• No specific numerical forward guidance was provided; management emphasized priorities of restoring sustainable profitability and disciplined growth.
• Management expects growth to remain challenging in the competitive industry environment but aims to find the right opportunities.
• Erie Secure Auto is expected to drive improved new business production and retention, with early success noted in Ohio, West Virginia, and Virginia.
• Erie Family Life aims to simplify operations via the new LifeWeb platform and a 40-year term life policy.
• Long-term goal is to reduce operational complexity and enhance customer/agent experience through technology and paperless options.
• Leadership transition: CEO Tim DeCastro and CFO Julie Pekowski to retire at the end of 2026; a search for the next CEO is ongoing with an interim CEO planned if necessary.

Business Segments and Product Lines:

• Erie Insurance Exchange: Experienced underwriting pressure due to catastrophes, though underlying non-catastrophe loss ratios improved. Retention ratio stood at 87.2%.
• Indemnity (Erie Indemnity Company): Reported solid YTD profitability with $578 million operating income. Growth in direct and affiliated assumed written premium drove commission expense increases.
• Erie Secure Auto: Expanded from 10 states previously; early data indicates positive impact on customer retention and new business.
• Erie Family Life: Launched "LifeWeb" platform for traditionally underwritten term and whole life policies; introduced a 40-year term life product.
• Technology Initiatives: Increased technology infrastructure and depreciation costs offset by reductions in acquisition support costs and professional fees due to reduced third-party usage.

Market and Competitive Landscape:

• Industry described as "competitive," making growth challenging; premium growth was slower (1.8%) compared to the prior year (7.6%).
• Erie maintains a "stable outlook" rating from AMVET, affirming its financial strength and discipline in a changing market.
• Recent awards include the 2026 Company of Excellence from the National Association of Professional Insurance Agents (NAPIT), recognition as one of America's Best Insurance Companies 2027 by Forbes, and one of America's Greatest Companies 2026 by Newsweek.
• The company leverages its independent agent network as a core competitive strength.

Risks and Challenges:

• Catastrophe losses were a significant headwind, contributing 14.1 points to the Q3 combined ratio and dampening quarter-over-quarter results.
• Competitive market conditions are constraining premium volume growth and policy enrollment.
• Rising operational costs, specifically healthcare expenses, incentive compensation, and technology infrastructure investments.
• Leadership transition presents execution risk, though the board has identified an interim CEO and plans to select an interim CFO to ensure continuity.

Management Commentary and Tone:

• Tone was reflective, appreciative, and confident in the company's long-term viability despite short-term volatility.
• Management acknowledged the "added pressure" from catastrophe losses but highlighted the improvement in the underlying non-catastrophe loss ratio.
• CEO Tim DeCastro expressed gratitude for his 30-year tenure and confidence in the company's values and people.
• CFO Julie Pekowski reflected on her 29-year career, emphasizing the strengthened financial discipline and modernized finance capabilities left for the future.
• Both executives expressed strong confidence in the interim leadership and the strategic direction of the company.

Analyst Questions and Answers:

• No analyst questions or answers were included as the call was pre-recorded and explicitly stated there would be no Q&A session.

Other Key Points:

• This was the final earnings call for both Tim DeCastro (CEO) and Julie Pekowski (CFO) as they retire at the end of 2026.
• The company's financial strength was validated by the maintenance of its excellent financial strength rating by AMVET.
• The organization is undergoing internal strategic adjustments to "reduce complexity" and improve service delivery, including expanding paperless options.
• Specific cost drivers for non-commission expenses included higher credit card processing fees (offset in some areas) and charitable contributions transitioning to the Erie Insurance Foundation.
• The call highlighted a focus on "reconnecting with former customers" using Erie Secure Auto pricing data.