Erie Indemnity Firm (ERIE) Q1 2024 Earnings Name Transcript

Erie Indemnity Firm (NASDAQ:ERIE) Q1 2024 Earnings Convention Name April 26, 2024 10:00 AM ET

Firm Contributors

Scott Beilharz – VP, IR
Tim NeCastro – President & CEO
Julie Pelkowski – EVP & CFO

Convention Name Contributors

Operator

Good morning, and welcome to the Erie Indemnity Firm First Quarter 2024 Earnings Convention Name. This name was pre-recorded, and there will likely be no question-and-answer session following the recording.

Now I would prefer to introduce your host for the decision, Vice President of Investor Relations, Scott Beilharz.

Scott Beilharz

Thanks, and welcome, everybody. We admire you becoming a member of us for this recorded dialogue about our first quarter outcomes. This recording will embrace remarks from Tim NeCastro, President and Chief Govt Officer; and Julie Pelkowski, Govt Vice President and Chief Monetary Officer. Our earnings launch and monetary complement have been issued yesterday afternoon after the market closed and can be found inside the Investor Relations part of our web site, erieinsurance.com.

Earlier than we start, I want to remind everybody that at the moment’s dialogue could comprise forward-looking remarks that mirror the corporate’s present views about future occasions. These remarks are primarily based on assumptions topic to identified and surprising dangers and uncertainties. These dangers and uncertainties could trigger outcomes to vary materially from these described in these remarks.

For data on necessary components which will trigger these variations, please see the protected harbor statements in our Kind 10-Q submitting with the SEC filed yesterday and within the associated press launch. This prerecorded name is the property of Erie Indemnity Firm. It might not be reproduced or rebroadcast by every other social gathering with out the prior written consent of Erie Indemnity Firm.

With that, we’ll transfer on to Tim’s remarks. Tim?

Tim NeCastro

Thanks, Scott, and because of all of you to your curiosity in Erie’s efficiency for the primary quarter of 2024. Final week, on April 20, we marked the 99th anniversary of our firm’s founding. Now on April 23, and we held our annual medium shareholders in particular person within the Thomas B. Hagen Constructing.

At that assembly, I mirrored on a exceptional journey Erie Insurance coverage has been on for practically a century. Two younger males, H.O. Hirt and O.G. Crawford, opened the doorways to the Erie Insurance coverage in 1925 and introduced in lower than $30,000 in web premiums after the primary 12 months.

At the moment, Erie’s enterprise has grown greater than $10 billion in premium and nearly 7 million insurance policies in pressure, protecting 12 states plus the District of Columbia with greater than 6,500 workers and greater than 14,000 impartial brokers. I am humbled and proud to be main the corporate, and I am assured in our place within the trade and our monetary stability as we enter our one centesimal 12 months of enterprise.

I will share some first quarter updates on our enterprise and office in a couple of minutes. However first, let us take a look at our financials. In our final name, we reported that weather-related claims have been up considerably in 2023, which had a unfavorable affect on our mixed ratio. Up to now this 12 months, we’re beginning to see a turnaround and our ratio is headed in the fitting route.

I will now flip it over to Julie to debate our monetary leads to larger element. Julie?

Julie Pelkowski

Thanks, Tim, and good morning, everybody. In 2023, we talked about our proactive method to addressing the profitability problem skilled by the Alternate, and that probably the most important affect would come on account of the upper fee will increase that have been taken. We anticipated a bigger affect from these fee will increase in 2024, given the truth that we have now 12 month insurance policies.

Continued incremental enchancment from fee will increase, coupled with climate occasions that have been decrease in severity in comparison with the primary quarter of final 12 months, drove an enchancment in profitability within the first quarter of 2024. Our mixed ratio within the first quarter was 106% in comparison with 122.7% within the first quarter of 2023. Climate occasions contributed to 9 factors to the mixed ratio within the first quarter of 2024 versus 12.6 factors in the identical interval final 12 months. The speed will increase proceed to contribute to important development for the Alternate as nicely.

Throughout the first quarter, direct and assumed written premium of the Alternate elevated 19%. Robust new development continues with new enterprise premium rising 32.4% in comparison with the identical interval final 12 months. Whole insurance policies in pressure grew 7.1%. We additionally maintained a strong coverage retention ratio of 91.2%. The continued sturdy premium development together with excessive retention and a extra favorable mixed ratio resulted within the policyholder surplus of the Alternate rising $180 million within the quarter to $9.5 billion as of March 31, 2024.

Shifting to the outcomes for Indemnity. Web revenue was $125 million or $2.38 per diluted share within the first quarter of 2024 and in comparison with $86 million or $1.65 per diluted share within the first quarter of 2023. Working revenue within the first quarter elevated over 25% to nearly $139 million in comparison with the primary quarter of 2023.

Administration payment income from coverage issuance and renewal providers elevated 19.3% to simply over $665 million within the first quarter of 2024 in comparison with the primary quarter of 2023, consistent with the rise within the direct and assumed written premiums of the Alternate.

The overall value of operations from coverage issuance and renewal providers elevated $81 million or 17.3% for the primary quarter of 2024 in comparison with the identical interval in 2023. Essentially the most good portion of our bills are commissions, grew $67 million for the primary quarter, pushed by the rise in direct and affiliated assumed written premiums of the Alternate.

Non-commission bills for the primary quarter grew simply over $14 million, pushed primarily by elevated personnel prices and agent associated prices. The numerous development within the Alternate’s premium drove will increase in our manufacturing assist value as nicely, comparable to underwriting and coverage processing.

Expertise investments proceed, though, general know-how prices have been decrease as extra growth prices have been capitalized within the first quarter of 2024 in comparison with the identical interval in 2023. Earnings from investments totaled $15 million in comparison with a lack of practically $5 million within the first quarter of 2023.

Web funding revenue was practically $16 million within the first quarter in comparison with simply $2 million in the identical interval of final 12 months on account of elevated restricted partnership earnings and better bond revenue. As all the time, we take a measured method to capital administration, and we keep a robust stability sheet. And for the first-three months of 2024, our monetary efficiency has enabled us to pay our shareholders over $59 million in dividends.

With that, I will flip the decision again over to Tim. Tim?

Tim NeCastro

Thanks, Julie. As I’ve talked about in earlier calls, migrating our legacy know-how platforms has been a high precedence for us,, and it continues to be in 2024. I am happy to share that we efficiently modernized greater than one-third of the legacy purposes we have had in place, and we’re additionally working to sundown these older methods as acceptable. This work is tied immediately to a different key precedence, expense administration.

Upgrades and newer platforms can eradicate lots of the inefficiencies and delays created by the older methods. One instance of a course of that is not too long ago been tightened because of modernization is with the most effective evaluation methodology of inspection for claims. Greatest evaluation course of usually resulted in lengthy cycle instances for purchasers, brokers and workers on account of an absence of knowledge integration, inflicting delays or pinning estimates.

Now brokers and clients can use the Photograph Appraisal instrument and record a longtime Direct Restore Program or DRP outlets inside their on-line account to find out the suitable methodology of inspection throughout their auto claims. This leads to quicker claims instances, usually chopping days out of the method.

The tempo of change is a subject that each challenges and energizes us, whether or not we’re speaking about platforms, processes, merchandise or on folks. If you happen to often tune into our earnings calls, it’s possible you’ll recall that final 12 months, we introduced a brand new method, we would be taking to our hybrid workforce beginning in 2024.

Hybrid workers who make up roughly 60% of our workforce now have a financial institution of 52 distant workdays to make use of annually once they select. Since starting this new method in January, we’re happy with the way it’s serving to to create larger vibrancy in our places of work and collaboration throughout groups.

We proceed to be taught and make adjustments to additional enhance the in-office expertise for workers, together with new convention room know-how and facility enhancements and to assist our sustainability efforts, we’re putting in power prices throughout our dwelling workplace campus to trace and share the efficiency of every constructing, together with electrical energy, pure gasoline and water consumption.

Workers will be capable of see how Erie compares to different industrial buildings with comparable utilization and dimension, serving to us keep accountable for our power use and maintaining in high of thoughts for our workforce. Sustainability is one side of our dedication to being a very good company citizen. We additionally proceed to put money into the communities the place we do enterprise, serving to us to construct belief and relationships and reinforce our dedication to service.

Not too long ago, we introduced 24 grants totaling near $1 million for education-focused nonprofits as a part of Pennsylvania’s schooling enchancment tax credit score program. The ramp will assist nonprofits supply and broaden instructional packages to prekindergarten to Twelfth-grade college students, specifically, low revenue underserved and minority college students in Northwest Pennsylvania. Erie has donated greater than $11 million by the EITC program because it started in 2001.

And in assist of revitalization work underway in our hometown in Erie, Pennsylvania, Erie Insurance coverage not too long ago offered a $1 million mortgage with plans to supply an extra assist sooner or later for a challenge that can rework from Erie’s tallest constructing, the Renaissance Middle at Penton State. Funds will assist with plans to renovate this downtown landmark into an upscale resort with area for eating places, places of work and public gatherings.

That is an thrilling challenge for Erie and enhances the opposite work and investments underway downtown that we have additionally supported. It is all geared toward making a vibrant neighborhood to work and dwell so we are able to proceed to draw and retain various and high-quality expertise that can place us for achievement in our subsequent century.

I really feel an ideal sense of satisfaction for the place we’re at the moment. We’re poised to maneuver into our subsequent century with a robust worker and company pressure and spectacular guide of enterprise and strong and modern know-how platforms and ready to climate continued challenges by considerate and proactive planning and we’re dedicated to maintaining our long-standing rules dwell in methods that can proceed to set us aside sooner or later.

As all the time, I would prefer to thanks for listening in at the moment and to your continued curiosity in Erie.

Query-and-Reply Session

Finish of Q&A