Erie Indemnity Company (NASDAQ:ERIE) Q3 2023 Earnings Call Transcript

Turning to Indemnity’s cost of operations for policy issuance and renewal services, commissions increased $45 million in the third quarter and $116 million in the first 9 months of 2023, compared to the same periods in 2022. The increases in agent compensation in both periods were driven by growth in direct and affiliated assumed written premium, partially offset by a decrease in agent incentive compensation. Non-commission expenses increased nearly $13 million in the third quarter of 2023, compared to 2022 and underwriting and policy processing expenses increased almost $3 million, primarily related to increased underwriting report costs. Information technology costs increased by almost $1 million, driven by increased professional fees. Also, administrative and other expenses increased just under $10 million in the third quarter of 2023, compared to the same period in 2022, driven by increases in personnel costs and professional fees.

For the first 9 months of 2023, Indemnity saw an increase in non-commission expenses of nearly $48 million. Expenses were primarily driven by increases in technology investments of almost $16 million, including professional fees, hardware, software and personnel costs. Underwriting and policy processing expenses increased just over $9 million due to increased reporting, personnel and postage costs. Administrative and other costs increased over $20 million due to an increase in personnel costs. Overall, personnel costs were impacted by increased compensation, including higher estimated costs for incentive plan awards. This was partially offset by lower pension costs compared to 2022, due to an increase in the discount rate. The increases in incentive plan costs were driven by improved, direct written premiums and policies in force growth and a higher company stock price at September 30, 2023, compared to September 30, 2022.

Investment income before taxes totaled just over $12 million in the third quarter compared to a loss from investments before taxes of nearly $1 million in the same period of 2022. For the first 9 months of 2023, we recorded investment income before taxes of $19.2 million compared to $300,000 in the first 9 months of 2022. As always, we take a very measured approach to our capital management, and we maintain a strong balance sheet. For the first 9 months of 2023, our financial performance enabled us to pay our shareholders over $166 million in dividends. Thank you again for your time today. Now I’ll turn the call back over to Tim. Tim?

Timothy NeCastro: Thanks, Julie. As we head into the last part of the year, we continue to make progress in our journey to modernize our legacy platforms and enhance our digital capabilities. In September, we launched a pilot for our refreshed workers’ compensation platform. The refresh introduces full policy servicing capabilities on our float application and service platform, the introduction of online accounts for our commercial customers and a new billing platform that allows customers to manage their account. The enhanced platform is being piloted in Indiana, who plans to roll it out in additional states before the end of this year. We’re also seeing positive impacts of some of the digital enhancements made earlier in the year.

Our agents ask for more capabilities to connect with customers through our online account platform. Now, thanks to updates made to our claims staff as a portal earlier in the year, customers and agents have important claim status information at their fingertips along with many other options, including online auto ID cards and paperless invoicing. In our third quarter, we’ve seen customer engagement and claim status grew by 8% compared to last year at this time. We believe this consistent growth will continue into 2024. Before we close, I’d like to make note of several recent accolades for our business and our workplace. Forbes has recognized Erie, on its 2024 list of America’s best insurance companies. Of the 84 companies on the list, Erie was 1 of only 5 to make a rankings in all 5 categories.