Executive Summary

Q3 delivered a clean EPS beat with improved underwriting at the Exchange: diluted EPS $3.50 vs $3.37 consensus (+$0.13), while total operating revenue was $1.067B vs $1.085B consensus (miss) as fee revenue tracked premium growth and expenses were well‑managed (consensus marked with ). Non‑commission expenses declined on lower incentive comp and professional fees, and investment income rose .
Exchange profitability inflected: combined ratio improved to 100.6% from 113.7% YoY; YTD combined ratio 108.6% vs 113.4% YoY, aided by lower weather events in Q3 and cumulative rate actions; policyholder surplus rose to $9.6B .
Management launched “Erie Secure Auto” (pilot in OH with strong early lift) and plans December rollouts to PA, WV, VA, supporting competitiveness and growth into mid‑2026 .
AM Best lowered Erie Insurance Group’s FSR to A (Excellent) from A+ (Superior) in September; management emphasized robust surplus ($9.6B) and ongoing rate/pricing discipline amid elevated weather and severity headwinds .
Stock reaction catalysts: quality of beat (expense control, higher net investment income) despite revenue miss; visible underwriting progress at the Exchange; new auto product rollout; offset by headline risk from rating action and weather/severity backdrop .

What Went Well and What Went Wrong

What Went Well

Expense discipline: non‑commission expense fell $11.9M YoY in Q3 on lower personnel incentive and professional fees; sales/advertising also down, supporting margin despite higher commissions .
Underwriting trend improvement at the Exchange: Q3 combined ratio of 100.6% vs 113.7% YoY; YTD 108.6% vs 113.4% YoY, reflecting rate adequacy with fewer Q3 weather events .
Product innovation: “Erie Secure Auto” pilot in OH showed “impressive” lift in submissions and DWP; broader deployment slated for Dec. and into mid‑2026 to boost competitiveness and growth .

What Went Wrong

Top‑line shortfall vs consensus: operating revenue $1.067B vs $1.085B* despite 6.7% YoY growth, as Fee revenue growth slightly lagged the single estimate .
Elevated commission expense: +$41M YoY in Q3 driven by premium growth and agent incentives, partly offsetting revenue gains .
Ratings optics: AM Best FSR change to A (Excellent) underscores industry pressure from weather and severity; management framed capital position as strong ($9.6B surplus) but acknowledged profitability challenges from CAT and severity trends .

Financial Results

Headline Results vs Prior Year, Prior Quarter, and Estimates

Metric	Q3 2024	Q2 2025	Q3 2025	Q3 2025 Consensus
Total Operating Revenue ($MM)	$999.9	$1,060.1	$1,066.7	$1,084.6*
Operating Income ($MM)	$180.1	$199.2	$208.9	—
Net Income ($MM)	$159.8	$174.7	$182.9	—
Diluted EPS ($)	$3.06	$3.34	$3.50	$3.37*

Notes: Consensus values marked with * and based on S&P Global; only one sell‑side estimate in the quarter for revenue and EPS (EPS est count=1; revenue est count=1)*.

Operating Revenue Breakdown

Revenue Line ($000s)	Q3 2024	Q3 2025	YoY Change
Mgmt fee – policy issuance & renewal	$769,162	$825,275	+$56,113
Mgmt fee – administrative services	$17,154	$18,831	+$1,677
Admin services reimbursement	$206,754	$215,694	+$8,940
Service agreement revenue	$6,816	$6,939	+$123
Total Operating Revenue	$999,886	$1,066,739	+$66,853

Selected Expense and Income Items

Item ($000s)	Q3 2024	Q3 2025	Commentary
Cost of ops – policy issuance & renewal	$613,007	$642,124	Commissions +$41.0M; non‑commission −$11.9M (lower personnel incentives, pro fees)
Cost of ops – administrative services	$206,754	$215,694	Tracks reimbursed costs
Net investment income	$17,322	$21,033	Higher yields/avg balances
Net realized/unrealized gains	$2,925	$1,331	Lower gains YoY

Insurance KPIs (Erie Insurance Exchange, managed by ERIE)

KPI	Q3 2024	Q2 2025	Q3 2025	Notes
Combined ratio	113.7%	116.9%	100.6%	Improvement driven by fewer Q3 weather events and rate actions
YTD combined ratio	113.4%	112.6%	108.6%	Steady progress YoY
Retention	—	89.7%	89.1%	Stable high retention
Avg premium per policy (YoY)	—	—	+10.7%	Reflects cumulative rate actions
Policy growth (YoY)	—	—	+0.2%	Demand moderated
Policyholder surplus ($B)	—	—	$9.6	Strong capital position

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Quantitative guidance (revenue, margins, OpEx, tax, segment)	FY/Quarter	None provided	None provided	N/A (no formal guidance)
Product rollout – Erie Secure Auto	Late 2025–Mid 2026	Pilot in OH (Aug)	Dec: PA, WV, VA; additional states through mid‑2026	New qualitative guidance/rollout plan
Dividend declared per Class A share	Q3 2025	$1.275 (Q3 2024)	$1.365	Raised YoY

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 2025, Q1 2025)	Current Period (Q3 2025)	Trend
Weather/CAT loss pressure	Q2: Elevated CATs; CATs drove 20.7 pts in Q2 CR; YTD CR 112.6; non‑CAT loss ratio improving as rate adequacy builds	Q3 CR 100.6% vs 113.7% YoY; YTD 108.6% vs 113.4%; low Q3 weather exposed underlying profitability	Improving as weather normalized in Q3
Pricing & rate actions	Q1: Fee revenue up 13.4% on policy issuance/renewal; IT and underwriting costs rising with investment in capabilities	Avg premium per policy +10.7%; retention 89.1%; confidence in rate adequacy supporting profitability	Adequacy contributing to margin recovery
Cybersecurity	Not highlighted in Q1	Q2: June cyber incident; no evidence of sensitive data breach; limited financial impact; systems restored by July 7	Stabilized; remediation underway
AM Best rating	Not highlighted in Q1/Q2 press materials	AM Best FSR revised to A (Excellent); surplus $9.6B; profitability actions emphasized	Headline risk, but capital strong
Product innovation/technology	Ongoing IT investment and higher IT costs in Q1	“Erie Secure Auto” pilot success; multi‑state rollout; broader modernization underway	Increasing focus on competitive positioning
Strategic venturing	—	Investments in Atomic and Feathery to advance embedded brokerage and AI intake workflows	Building tech partnerships

Management Commentary

“This quarter marks a meaningful step forward in Erie's return to profitability… the third quarter combined ratio was 100.6% compared to 113.7% in the same quarter last year.” – Julie Pelkowski, CFO .
“Erie Secure Auto has the pricing sophistication of our rate lock product without the lock… we’ve seen… impressive impacts on submitted applications and direct written premium [in Ohio]. We plan to deploy… in December to… Pennsylvania, West Virginia, and Virginia, with additional states to follow.” – Tim NeCastro, CEO .
“AM Best adjusted the financial strength rating… from A‑plus Superior to A‑Excellent… surplus… remains extremely robust at $9.6 billion… profitability challenges… [from] more frequent and severe weather events and increased claim severity.” – Tim NeCastro, CEO .

Q&A Highlights

The call was pre‑recorded; management stated there would be no Q&A session .
Management clarified drivers of improved profitability (rate adequacy, fewer Q3 weather events) and highlighted product rollout and capital strength in prepared remarks .

Estimates Context

EPS beat: $3.50 actual vs $3.37 consensus* (+$0.13), helped by lower non‑commission expense and higher net investment income .
Revenue miss: $1.067B actual vs $1.085B consensus* (−1.7%), though total operating revenue grew 6.7% YoY .
Coverage breadth was thin (only 1 estimate for revenue and EPS)*.

Metric	Q3 2025 Actual	Q3 2025 Consensus	Surprise
Diluted EPS ($)	3.50	3.37*	+0.13
Total Operating Revenue ($MM)	1,066.7	1,084.6*	−17.9

*Values retrieved from S&P Global.

Key Takeaways for Investors

Quality beat: EPS upside despite a small revenue miss was driven by expense control (lower incentive comp and professional fees) and higher net investment income; signs of margin discipline are firming .
Underwriting turning: Exchange combined ratio moved near breakeven in Q3; if low CAT activity persists and rates maintain, profitability should continue to normalize into 2026 .
Product catalyst: “Erie Secure Auto” rollout should support competitive positioning and growth; early OH results encouraging, with multi‑state expansion in December and further states through mid‑2026 .
Capital/risk: AM Best FSR revision to A (Excellent) is a headline risk but capital remains strong (surplus $9.6B); watch weather/severity trends and retention as rate actions compound .
Watch expenses: Q3’s lower non‑commission expense benefited from lower incentive plan costs (including stock price effects); sustainability into 2026 depends on ongoing cost discipline and incentive normalization .
Trend monitor: Retention (89.1%) and average premium per policy (+10.7%) indicate rates are sticking without undue churn; continue to track policy growth and DWP growth as new products launch .
Near‑term setup: Focus on estimate revisions—EPS likely nudged up on operating leverage, while revenue models may trim slightly; narrative anchored on underwriting progress and product rollout against weather/rating optics .

Appendix: Additional Data Points

Q3 operating income $208.9M (+16.0% YoY); net income $182.9M (+14.4% YoY) .
Management fee revenue (policy issuance & renewal) +7.3% YoY in Q3; administrative services +9.8% .
Dividends declared per Class A share in Q3: $1.365 (vs $1.275 in Q3’24) .

ERIE INDEMNITY CO (ERIE)·Q3 2025 Earnings Summary