Erie Indemnity (ERIE) Q1 2026 Earnings Transcript

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DATE

Friday, April 24, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Timothy Gerard NeCastro
• Executive Vice President and Chief Financial Officer — Julie Marie Pelkowski

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TAKEAWAYS

• Board Leadership Changes -- Jonathan Hurtaggen was elected Chairman of the Board, succeeding Tom Hagen, who becomes Chairman Emeritus and continues as chair of the executive committee.
• Direct Written Premium Growth -- 3.6% increase for the quarter, markedly lower than the 13.9% rate in the prior year period.
• Average Premium Per Policy -- 8.1% increase compared to the previous year, with policies in force declining 1.7% and retention dropping to 88%.
• Combined Ratio (Exchange) -- 99.4%, a substantial improvement from 108.1% in the prior-year quarter, driven by roughly three-point lower non-catastrophe losses and an almost seven-point improvement in catastrophe losses.
• Policyholders' Surplus (Exchange) -- $10.1 billion at March, in line with the previous quarter, reflecting breakeven underwriting and investment results.
• Indemnity Net Income -- Nearly $151 million, or $2.88 per diluted share, up from $138 million, or $2.65 per diluted share, the previous year.
• Operating Income -- Approximately $167 million, up 10% from $151 million a year ago.
• Management Fee Revenue -- Approximately $31 million, or 4.2% higher, consistent with direct written premium growth.
• Expense Management -- Overall expenses up 2.8%, with commission expense rising 6.4% to $465 million and noncommission expenses declining 5.6% to $180 million, largely due to lower professional fees.
• Investment Income -- $22 million compared to $20 million last year, attributable to higher yields and invested balances.
• Dividends Paid -- Approximately $68 million distributed to shareholders in the first three months.
• Product Expansion -- Erie Secure Auto expanded from Ohio to Virginia and West Virginia, with plans to reach four more states this quarter.
• Commercial Lines Rollout -- Business Auto 2.0 introduced in North Carolina, Virginia, Maryland, and the District of Columbia; New York remains to be rolled out.
• Technology Adoption -- Over 50% of systems now migrated to modern platforms, with continued focus on technology and digital tool rollout, including ChatGPT Enterprise for all employees and targeted AI workflow integration.

SUMMARY

Erie Indemnity Company (NASDAQ:ERIE) reported that improvement in underwriting profitability, especially reduced catastrophe and non-catastrophe losses, led to significant gains in its key performance metrics. Board leadership transitioned to Jonathan Hurtaggen, with Tom Hagen continuing in an advisory and committee leadership role, while technology modernization, digital quoting platforms, and expanded AI deployment remain top operational priorities. Management maintains a disciplined approach to capital allocation, having paid $68 million in dividends and reported stable surplus levels, while product rollouts in both personal and commercial lines are accelerating, with continued expansion of Erie Secure Auto and Business Auto 2.0 planned throughout the year.

• The company highlighted immediate results from its online quoting platform pilot in Ohio, noting better lead conversion and efficiency, with broader deployment imminent.
• Management stated, "We are already seeing a positive impact on submissions and premium in those states." in reference to the Erie Secure Auto expansion into new markets.
• Artificial intelligence use was described as focused on "practical" workflow improvements—specifically in claims subrogation, backlog reduction, and accelerating analysis—while explicitly emphasizing AI is meant to "strengthen that human touch."
• Board composition changes included the addition of William Edwards as a new director and acknowledgment of the passing of longtime member George Lueckor.

INDUSTRY GLOSSARY

• Combined Ratio: A key insurance profitability metric calculated as incurred losses and expenses divided by earned premium; a ratio below 100% signals underwriting profit.
• Policyholders' Surplus: The excess of an insurer’s assets over its liabilities, serving as a financial buffer to absorb underwriting and investment losses.
• Direct Written Premium: The total premium on all policies written during a period before deducting reinsurance and cancellations.

Full Conference Call Transcript

Timothy Gerard NeCastro: Thanks, Scott. And good morning, everyone. Before we get into our first quarter results, I would like to share some recent changes to the Erie Indemnity Company Board of Directors. First, Tom Hagen recently informed the board of his decision to step down as chairman after serving in the role for more than 20 years. Following a special meeting of the board of directors on April 19, Jonathan Hurtaggen was unanimously elected as Chairman of the Board. Jonathan is the son of Tom Hagen and the late Susan Hurt Hagen, and the grandson of our cofounder, H. O. Hurt. He has served on our board since 2005 and as vice chairman since 2013.

Jonathan brings a thoughtful, steady approach to leadership, along with a strong understanding of our business and of our culture. He also carries forward the legacy of those who helped build this company, grounded in service, integrity, and a long-term perspective. Tom will continue to serve as a member of the board as Chairman Emeritus and the chair of the executive committee. His experience and guidance will remain an important part of our leadership as we move forward. The board of directors also recently welcomed a new member. William Edwards is an attorney and partner at Taft in Indianapolis, Indiana, where he practices employment law.

He is also an alumnus and current board chair at Wittenberg University, which is the alma mater of Erie's cofounder, H. O. Hurt. Finally, we are deeply saddened by the recent passing of one of our longtime board members and retired Erie executive, George Lueckor. George spent 38 years as an employee, retiring in 2010 as executive vice president of field operations. He continued his service to the company by joining the board of directors in 2016, where he remained an engaged and thoughtful contributor. He often said he was honored to continue his association with Erie in this capacity, and we were equally honored to benefit from his experience and his perspectives.

Let us now turn to the first quarter results. As we shared in previous calls, 2025 was one of the more challenging periods we faced in terms of profitability, marked by elevated weather activity, including the costliest weather event in our company's history last March, and a complex market. But by the end of 2025, and now in 2026, we started to see a more balanced picture and early signs that we are beginning to turn a corner. We are still operating in a competitive market and there is more work ahead, but the steady, measured progress is encouraging. Here to share more details of our first quarter results is Chief Financial Officer, Julie Marie Pelkowski. Julie?

Julie Marie Pelkowski: Thank you, Tim, and good morning, everyone. Starting with the results of the Erie Insurance Exchange, the insurance operations we manage, with significantly lower catastrophe and weather-related losses in 2026, the underwriting performance of the core business of the Exchange continued to be more evident, in contrast to the elevated weather activity we experienced a year ago. Following the period of significant rate increases across the industry, growth continues to be challenging. Higher premiums are impacting customer behavior, and measures like policies in force and retention reflect a more competitive landscape. Now getting into the details of the first quarter performance of the Exchange, starting with growth, direct written premium grew 3.6% in 2026 compared to 13.9% in 2025.

Given our pricing has reached more adequate levels, this has increased our competitive position challenge. While our average premium per policy grew 8.1% in the first quarter, policies in force were down 1.7% from this time last year and retention declined to 88%. Shifting to profitability, the Exchange's combined ratio was 99.4% in 2026 compared to 108.1% in 2025. The primary drivers of the combined ratio improvements are twofold. First, non-catastrophe losses improved about three points compared to the prior year, reflective of stronger rate adequacy. From a catastrophe loss perspective, we saw an almost seven-point improvement from 2025.

As Tim mentioned, 2025 included the most expensive weather event in our history, which drove the much higher combined ratio last year. In 2026, the catastrophe losses we experienced were more in line with historical trends. Our policyholders' surplus at March was $10.1 billion, consistent with the December 2025 surplus level, reflecting essentially breakeven underwriting and investment results. Shifting to the results for Indemnity, net income was nearly $151 million, or $2.88 per diluted share, in 2026 compared to $138 million, or $2.65 per diluted share, in 2025. Operating income increased approximately 10% to almost $167 million from $151 million in 2025.

Management fee revenue for policy issuance and renewal service grew approximately $31 million, or 4.2%, in line with the increase in the direct written premiums of the Exchange, while we had more modest expense growth of 2.8% in 2026. Commission expense, our largest cost of operations, increased 6.4% to $465 million, driven largely by agent incentive compensation due to the underwriting profitability improvement, as well as higher base commissions driven by premium growth. Noncommission expenses decreased approximately 5.6% to $180 million, primarily driven by lower professional fees and expenses across most other categories except for personnel costs, which were impacted by higher pension costs and increased compensation.

Our investment income in the first quarter was $22 million compared to $20 million in the same period of 2025, reflecting higher net investment income driven by higher yields and higher invested balances. As always, we take a measured approach to capital management and maintain a strong balance sheet. For the first three months of 2026, our financial performance enabled us to pay our shareholders approximately $68 million in dividends. With that, I will turn the call back over to Tim.

Timothy Gerard NeCastro: Thank you, Julie. As we look ahead, our focus is on building on this momentum, continuing to move forward with discipline, and staying grounded in the long-term approach that has guided us through this past year. On the personal lines side, we are excited for the continued rollout of Erie Secure Auto. Following a successful pilot in Ohio, we expanded into Virginia and West Virginia. We are already seeing a positive impact on submissions and premium in those states. We expect to introduce Erie Secure Auto in four additional states this quarter, with continued expansion planned throughout the remainder of the year. In commercial lines, we are continuing to introduce Business Auto 2.0 across our footprint.

After rolling out [inaudible] states in 2025, the product expanded to North Carolina, Virginia, Maryland, and the District of Columbia in the first quarter of this year. We now have one remaining state, New York, to complete the rollout. This product is improving the quoting and servicing experience for agents and customers while also supporting greater consistency and efficiency in our underwriting. Another role that will help connect our independent agents with customer leads is our new online quote platform. It was launched in Ohio in February, and we will introduce it in Maryland, Pennsylvania, Virginia, and West Virginia next month. This is a more streamlined, modern quoting experience designed to move prospects through the process more efficiently.

It is the result of several years of testing and refinement and, over time, it will replace our existing online quoting tools. Importantly, it supports growth, improving lead conversion, and reducing connection time to our agents, while integrating with products like Erie Secure Auto as they are introduced across our footprint. Modernization of our technology platforms is key to our ability to introduce these new capabilities, and we are making meaningful progress. Today, more than half our systems have been migrated to contemporary platforms, enhancing both the capabilities we deliver and the speed at which we bring new solutions to market. Modernization is only part of the story.

We are also focused on how artificial intelligence can help us improve how work gets done across the organization. Over the past year, we have moved from early experimentation to scaled deployment of secure tools, including ChatGPT Enterprise, now available across our employee population. And we are embedding AI into real workflows with strong governance in place. In claims, AI is helping teams prepare subrogation cases more quickly and more consistently. In other areas, teams are reducing backlogs, accelerating analysis, and improving response times. Many of our most impactful use cases are practical, saving time, improving quality, and reducing risk. And to be clear, this is not about replacing people. It is about helping our employees do their best work.

Our advantage has always been the judgment, care, and experience our employees and agents bring to what they do. We believe AI should strengthen that human touch, not replace it. That will continue to be our focus as we leverage this powerful tool across the organization. As we move through 2026, we remain focused on supporting our employees and agents, serving our customers, and continuing to build on the progress we have made for restoring profitability and balancing it with healthy growth. Thank you all for your continued support, and for your interest in Erie Indemnity Company.

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