ERIE INDEMNITY CO (ERIE)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 delivered strong operational performance: operating income rose 31.7% YoY to $167.3M on total operating revenue of $924.1M; diluted EPS was $2.91 vs $2.12 in Q4 2023 .
• Management fee revenue from policy issuance and renewal services grew 16.1% YoY in Q4, reflecting robust direct and affiliated assumed written premium growth at the Exchange; investment income more than doubled YoY to $20.8M on improved limited partnership results and lower impairments .
• Exchange fundamentals improved: Q4 combined ratio of 105.7 (vs 111.4), full-year combined ratio 110.4 (vs 119.1), with catastrophe losses down to 9.6 points in 2024 (vs 12.6), aided by rate actions and moderating severity; retention remained strong at 90.4% and policies in force surpassed 7 million .
• Dividends were increased 7.1% for 2025 and maintained in Q1 2025; Board kept the management fee rate at the 25% maximum effective Jan 1, 2025, reinforcing cash return and fee stability; Q1 dividend payable Apr 22, 2025 (ex-date Apr 7) .

What Went Well and What Went Wrong

What Went Well

• Strong fee revenue growth: “Management fee revenue – policy issuance and renewal services increased over $97 million or 16.1% in the fourth quarter… and $452 million or 18.5% for the total year” .
• Improved Exchange profitability: “In the fourth quarter of 2024, the combined ratio was 105.7, an improvement from 111.4… For the year, 110.4, nearly 9 points better than 2023” .
• Investment income recovery: “Income from investments for the fourth quarter totaled almost $21 million… driven by a $7 million increase in net investment income and a $7 million decrease in net impairment losses” .

What Went Wrong

• Cost pressures persisted: Non-commission expense rose $6.2M YoY in Q4, driven by underwriting and policy processing (+$4.8M), IT (+$2.6M), and customer service (+$2.0M), partially offset by lower sales/advertising (-$2.0M) and administrative/other (-$1.2M) .
• Commission expense growth tracked premium growth: Commissions increased $50.8M YoY in Q4 and $252.9M for FY 2024, reflecting higher written premiums and incentive comp, pressuring operating leverage .
• Hurricane and weather impacts: Hurricane Helene added 1.6 points to the 2024 combined ratio; while catastrophe points declined YoY, weather remains a structural risk factor .

Financial Results

Segment/Revenue Mix (Operating revenue components)

KPIs (Exchange-focused)

Note: Administrative services reimbursement revenue and corresponding costs have no net impact on operating income .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Strategy and modernization: “Modernization of our technology platforms and processes has been a key initiative… foundational to our future growth and geographic expansion… several legacy platforms have been migrated to the cloud… new billing platform… Business Auto 2.0 will move ahead for full rollout in the first half of 2025” .
• Exchange performance drivers: “Direct written premiums… grew 16% in the fourth quarter… These results were primarily driven by… rate increases… severity trends have been moderating… catastrophe losses… were lower in 2024” .
• Cost dynamics: “Noncommission expenses… grew just over $6 million… driven by… underwriting and policy processing… IT investments… customer service costs… offset by lower sales and advertising and lower administrative and other costs” .
• Capital returns: “In 2024, we paid our shareholders over $237 million in dividends… Board approved a 7.1% increase in the 2025 regular quarterly cash dividend” .

Q&A Highlights

• The call was prerecorded with no Q&A session; management provided prepared remarks only .

Estimates Context

• S&P Global Wall Street consensus EPS and revenue estimates for Q4 2024 were unavailable due to a provider daily limit error at the time of retrieval; therefore, we cannot provide versus-consensus comparisons for this quarter. Values would normally be retrieved from S&P Global; unavailable in this instance.

Key Takeaways for Investors

• Fee-driven growth remains robust; Q4 management fee revenue rose 16.1% YoY, supporting double-digit operating income growth despite elevated commissions and non-commission costs .
• Exchange fundamentals are firmly improving, with Q4 combined ratio at 105.7 and FY at 110.4, aided by rate actions, moderating severity, and lower catastrophe losses; supports medium-term margin trajectory at Indemnity through fee linkage to premiums .
• Investment income has turned into a tailwind with improved limited partnership results and lower impairments; this contributed materially to YoY net income growth in both Q4 and FY 2024 .
• Capital return visibility strengthened: dividend per Class A raised 7.1% to $1.365 and maintained for Q1 2025, with Board reaffirmation of the 25% management fee rate for FY 2025, anchoring fee stability and payout capacity .
• Cost discipline and modernization are key to sustaining operating leverage; cloud migration, new billing platform, and Business Auto 2.0 rollout in H1 2025 should enhance efficiency and customer experience, but near-term non-commission expenses may reflect continued investment .
• Weather and legal environment remain watch points; although catastrophe loss points declined in 2024, events like Hurricane Helene still impact results, necessitating continued rate adequacy and underwriting rigor .
• With consensus data unavailable this quarter, monitor subsequent estimate revisions once S&P Global data is accessible; the beat/miss narrative will hinge on how improved Exchange profitability and investment income translate to future fee revenue and EPS trajectories (S&P Global consensus unavailable this instance).