Erie Indemnity Q2 2025 Earnings Report

Erie Indemnity EPS Results

• Actual EPS: $3.34
• Consensus EPS: $3.55
• Beat/Miss: Missed by -$0.21
• One Year Ago EPS: N/A

Erie Indemnity Revenue Results

• Actual Revenue: $1.06 billion
• Expected Revenue: $1.09 billion
• Beat/Miss: Missed by -$27.75 million
• YoY Revenue Growth: N/A

Erie Indemnity Announcement Details

• Quarter: Q2 2025
• Date: 8/7/2025
• Time: After Market Closes
• Conference Call Date: Friday, August 8, 2025
• Conference Call Time: 10:00AM ET

Erie Indemnity (NASDAQ:ERIE) operates as a managing attorney-in-fact for the subscribers at the Erie Insurance Exchange in the United States. It provides issuance and renewal services; sales related services, including agent compensation, and sales and advertising support services; underwriting services comprise underwriting and policy processing; and other services consist of customer services and administrative support services, as well as information technology services. The company was incorporated in 1925 and is based in Erie, Pennsylvania.

Erie Indemnity Q2 2025 Earnings Call Transcript

Key Takeaways

• Negative Sentiment: On June 7, Erie identified a cybersecurity event and initiated a proactive network shutdown. Independent forensics found no evidence of a data breach and most systems were restored by July 7.
• Positive Sentiment: Erie Exchange direct written premiums grew 9.2% in the second quarter and 11.4% year-to-date, with average premium per policy up 11.9% and a strong 89.7% retention ratio.
• Negative Sentiment: Erie's combined ratio worsened to 116.9% in Q2 (from 115.9%) and 112.6% year-to-date (vs. 111.1% in 2024) largely due to increased catastrophe losses.
• Positive Sentiment: Indemnity reported Q2 net income of $175 million ($3.34 per share), up from $164 million ($3.13/share), with operating income rising nearly 5% on stronger management fee revenue.
• Neutral Sentiment: Erie launched the $100 million-seeded Erie Insurance Foundation to consolidate charitable giving and support long-term grant making.

Presentation

[Operator]

Good morning and welcome to the Erie Indemnity Company Second Quarter twenty twenty five Earnings Conference Call. This call was prerecorded and there will be no question and answer session following the recording. Now, I'd like to introduce your host for the call, Vice President of Investor Relations, Scott Milehars.

[Scott Beilharz, VP - Treasury at Erie Indemnity Company]

Thank you, and welcome, everyone. We appreciate you joining us for this recorded discussion about our second quarter results. This recording will include remarks from Tim MacCastro, President and Chief Executive Officer and Julie Pokowski, Executive Vice President and Chief Financial Officer. Our earnings release and financial supplement were issued yesterday afternoon after the market closed and are available within the Investor Relations section of our website, yearinsurance.com. Before we begin, I would like to remind everyone that today's discussion may contain forward looking remarks that reflect the company's current views about future events.

[Scott Beilharz, VP - Treasury at Erie Indemnity Company]

These remarks are based on assumptions subject to known and unexpected risks and uncertainties. These risks and uncertainties may cause results to differ materially from those described in these remarks. For information on important factors that may cause such differences, please see the Safe Harbor statements in our Form 10 ks filing with the SEC filed yesterday and in the related press release. This prerecorded call is the property of your indemnity company. It may not be reproduced or rebroadcast by any other party without the prior written consent of your indemnity company. With that, we move on to Tim's remarks. Tim?

[Timothy G. NeCastro, President and Chief Executive Office at Erie Indemnity Company]

Thanks, Scott. And thank you all for listening in today. Before we get into our financial update for the second quarter, I'd like to spend a few minutes sharing some insights into the information security event our company recently experienced. On June 7, our IT team identified unauthorized network activity. Consistent with our incidence response plans, the team took immediate action and initiated a proactive network outage and system shutdown.

[Timothy G. NeCastro, President and Chief Executive Office at Erie Indemnity Company]

This was a necessary step to protect our systems and data, and thankfully, it was effective. After a thorough forensics investigation conducted by independent cybersecurity specialists, there is no evidence that any sensitive personal information, financial records, or legally protected data was breached by the threat actor during our incident. Our recovery process was supported by some of the nation's leading cybersecurity specialists and was conducted with an intentional, phased, and prioritized method. This complex recovery process took time to ensure that systems and applications were restored safely and securely. While that work was underway, teams from across the company moved quickly to implement workarounds for critical processes, like claims handling, and to mobilize our workforce to step outside their normal duties to support.

[Timothy G. NeCastro, President and Chief Executive Office at Erie Indemnity Company]

By July 7, one month after the outage, the majority of our systems were back up and running. I'd like to express my appreciation to the employees and agents who worked tirelessly to recover our systems safely and to keep our operations going. From every area of the company, and from both employees and agents, I saw a willingness to do whatever it took to get through this situation and to uphold our promise of service. That is never what we expected to be dealing with in our one hundredth year business, but incidents like this one are an unfortunate reality of doing business in today's world. Our information security protocols, along with our technical and physical safeguards, are aligned with the best practices of the insurance industry.

[Timothy G. NeCastro, President and Chief Executive Office at Erie Indemnity Company]

However, this incidence shows that no organization is completely immune to such attacks. Cybercriminal groups and information security incidents are becoming increasingly sophisticated, and even the most well protected organizations can be impacted. Safeguarding our systems and the information we have continue to be top priorities, and we're already implementing what we learned from this incident to further strengthen our cybersecurity protections. Now, let's turn to the financial performance of the past quarter. Here to share the details is Chief Financial Officer, Julie Pelkowski. Julie?

[Julie Pelkowski, EVP & CFO at Erie Indemnity Company]

Thank you, Tim, and good morning, everyone. As Tim mentioned, while the cyber incident caused a challenging end to our second quarter, we're certainly proud of how quickly teams mobilized to ensure we were able to provide our policyholders with best in class service, albeit under less than ideal circumstances. Given the diligent implementation of our business continuity protocols, we do not believe there has been a material impact to our statements of financial position, income, or cash flows as a result of this incident. Starting with the results of the Erie Insurance Exchange, the insurance operations we manage from a growth perspective. As we've seen in recent quarters, the significant rate increases we implemented in 2023 and 2024 continue to drive the Exchange's direct written premium growth.

[Julie Pelkowski, EVP & CFO at Erie Indemnity Company]

The Exchange's direct and assumed written premiums grew by nearly 9.2 in the 2025 and eleven point four percent in the 2025 compared to the same respective periods in the prior year. The rate impact is evidenced in the increase in our average premium per policy of 11.9 percent. We saw policies in force growth of 1.7%, and our policy retention ratio remained strong at 89.7%. The more adequate rates are continuing to drive improvement in the Exchange's non catastrophe loss ratio. However, from a seasonality perspective, we generally see higher weather losses in the first half of the year.

[Julie Pelkowski, EVP & CFO at Erie Indemnity Company]

We saw this trend hold true as the exchange's combined ratio was 116.9 in the 2025 compared to 115.9 in the 2024, with catastrophic weather events contributing 20.7 points and 16.2 points in those same respective periods. The year to date combined ratio was 112.6 in 2025 compared to 111.1 in the first six months of 2024. In the first six months, catastrophic weather events contributed 18.5 points versus 12.7 points in the same period of 2024. These catastrophe losses were experienced in March, April, and May, the spring months that generally have the highest experience of weather events in our geographic footprint. The other months in the six month period experienced combined ratios below 100%.

[Julie Pelkowski, EVP & CFO at Erie Indemnity Company]

As I highlighted during our last call, if you referenced the investor supplement that is published 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 94.695.1% in the second quarter and first six months of 2025, respectively. In summary, while our rate increases contribute to profitability improvements, they are being masked by the more significant catastrophe losses we experienced in 2025 compared to last year. The Exchange's underwriting losses were partially offset by investment returns, which resulted in a slight decrease in policyholder surplus from $9,300,000,000 at December at June 2025, which held steady from March 2025. Shifting to the results for indemnity, net income was $175,000,000 or $3.34 per diluted share in the 2025 compared to $164,000,000 or $3.13 per diluted share in the 2024. Year to date, Indemnity net income was $313,000,000 or $5.99 per diluted share compared to $289,000,000 or $5.52 per diluted share at this time last year.

[Julie Pelkowski, EVP & CFO at Erie Indemnity Company]

Operating income increased in the second quarter nearly 5% to almost $200,000,000 compared to the 2024, bringing our year to date 2025 operating income to $350,000,000 which was an increase of almost 7% compared to the 2024. The main driver of these increases continues to be higher management fee revenue resulting from the growth in the Exchange's direct written premium. Management fee revenue from policy issuance and renewal services increased 8.3% to $824,000,000 in the 2025 compared to the 2024 and nearly 11% to $1,600,000,000 in the first half of the year compared to this time last year. Total cost of operations from policy issuance and renewal services increased $54,000,000 or 9.1% for the 2025 compared to the same period in 2024. The 2025 saw an increase of $132,000,000 or 11.5% when compared with the 2024.

[Julie Pelkowski, EVP & CFO at Erie Indemnity Company]

Commission expenses are the largest driver, increasing almost $44,000,000 or just over 10% compared to the 2024 and nearly $105,000,000 or 13.1% in the 2025 compared to the same period of 2024. Noncommission expenses for the second quarter increased nearly $11,000,000 or 6.1 percent, primarily driven by higher information technology costs and sales and advertising expenses. Year to date 2025 noncommission expenses grew almost $27,000,000 or 7.7% compared to the 2024. This was primarily driven by increased information technology costs, as well as higher underwriting and policy processing, sales and advertising, and customer services expenses. Personnel costs within each of these expense categories were impacted by increased health care costs compared to 2024.

[Julie Pelkowski, EVP & CFO at Erie Indemnity Company]

Income from investments totaled almost $20,000,000 compared to earnings of nearly $14,000,000 in the 2024. Net investment income was just over $20,000,000 in the second quarter compared to almost $16,000,000 in the same period last year. Total investment income in the 2025 was $39,000,000 compared to $29,000,000 in the 2024. Net investment income for the 2025 drove most of this improvement, contributing $8,000,000 compared to 2024. As always, we take a measured approach to capital management, and we maintain a strong balance sheet.

[Julie Pelkowski, EVP & CFO at Erie Indemnity Company]

And for the first six months of twenty twenty five, our financial performance has enabled us to pay our shareholders over $127,000,000 in dividends. With that, I'll turn the call back over to Tim. Tim?

[Timothy G. NeCastro, President and Chief Executive Office at Erie Indemnity Company]

-Thanks, Julie. The cybersecurity event and system outage occupied much of our attention over the past quarter, but we also celebrated several notable milestones, achievements, and accolades. In April, several members of our leadership team capped off Erie's one hundredth anniversary week with a visit to the NASDAQ headquarters in New York City to ring the opening bell. This was to celebrate both our one hundredth year in business and the thirtieth anniversary of Erie Indemnity's listing on the NASDAQ. It was a remarkable moment, representing the amazing growth and success our company has achieved since its humble beginnings in 1925.

[Timothy G. NeCastro, President and Chief Executive Office at Erie Indemnity Company]

Another example of this success came in May, when we announced the creation of the Erie Insurance Foundation, a private charitable foundation that will create long term sustainability for charitable contributions and grant making. To launch the initiative and seed the foundation's endowment, Erie Indemnity Company, as the management company for Erie Insurance, plans to donate $100,000,000 Many of the company's charitable giving funds and activities previously coordinated by the Giving Network will be consolidated under this separate five zero one(three) foundation. This will enable the foundation's board of directors and officers to direct the entity's investment decisions, charitable strategy, and grant funding. The $100,000,000 seed gift from Erie Indemnity will build a charitable legacy for years to come as the initial gift can be invested and grow. The support of our communities is part of our larger commitment to putting service above all else.

[Timothy G. NeCastro, President and Chief Executive Office at Erie Indemnity Company]

Service is at the heart of unique value proposition, and recent recognitions show that our customers continue to experience it firsthand. Earlier this year, Erie was named the highest rated auto insurance provider by Consumer Reports. It was the highest rated carrier out of 36 of the nation's top carriers, with rankings based on factors like premiums, claims, coverage, and policy clarity. Consumer Reports is an independent nonprofit member organization that works side by side with consumers for truth, transparency, and fairness in the marketplace, including insurance. This recognition of our value proposition was a big win for us and it will hopefully prompt more consumers to consider us for their insurance needs.

[Timothy G. NeCastro, President and Chief Executive Office at Erie Indemnity Company]

To round out this quarter's recognitions, our strong financial standing was validated in June when Erie moved up 52 spots on the twenty twenty five Fortune 500 list. Improved its position from three seventy six to three twenty three on the list of America's largest corporations based on total revenue for the 2024 fiscal year. This marks the twenty second year Erie has been named to Fortune 500, alongside some of the most well known and successful companies in this country. Over the course of the last century, we've never stopped delivering on the promise our founders made in the earliest days of the company to put service and people above all else. This commitment has helped us establish a reputation for exceptional service that consistently ranks higher than the rest of the insurance industry.

[Timothy G. NeCastro, President and Chief Executive Office at Erie Indemnity Company]

It's also helped us weather countless challenges over the years, including the one we just experienced. Thank you to our loyal and committed employees and agents for upholding our promise of service, to our shareholders for your continued trust and support, and to our policyholders placing your trust in us. Thank you all for your interest in Erie.

Participants

Executives

• Scott Beilharz, VP - Treasury
• Timothy G. NeCastro, President and Chief Executive Office
• Julie Pelkowski, EVP & CFO