Erie Indemnity Company

Good morning and welcome to the Erie Indemnity Company second quarter 2022 earnings conference call. This call was pre-recorded 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 Bauhars.

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 DeCastro, President and Chief Executive Officer, and Greg Gutting, 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, ErieInsurance.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. 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-key filing with the SEC dated July 28, 2022 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'll move on to Tim's remarks. Tim?

Thanks, Scott, and thanks to all of you for listening in today. It's hard to believe we're already halfway through 2022. The first half of the year was a time of transition and new beginnings. Back in April, we began bringing a small number of employees back to our home office. These employees volunteered to be the first to work in our new Thomas B. Higgin building, and they've been pioneers in helping us shape the employee experience as we move into a new era of work. That new era began in July as we started bringing 200 more employees back to work on-site each week, a process we expect to continue for several more months. As we do this, we're finding a balance between flexibility, productivity, and connectedness. Wherever possible, employees are working a hybrid schedule some days in the office and others remote. This allows employees to have the face-to-face interactions that are a key part of building strong relationships while still giving them the flexibility to come to value from working virtually. It's also the core of our business strategy, combining the human touch with an enhanced digital experience. With that said, we know many employees prefer the convenience of fully remote work. And without a doubt, the pandemic has only heightened the competition for talent and for remote work opportunities. So while hybrid remains our preferred model, we're also taking initial steps to expand remote opportunities in target areas and job families facing challenges in recruiting and retention. We believe this move will ultimately help to alleviate some of our talent challenges with minimal impact to our relationship-based culture. Talent is just one of the many challenges we and so many other companies are facing. The property and casualty insurance industry has been particularly affected by inflation. According to the Insurance Information Institute, replacement costs associated with homeowners and auto insurance, which are our largest lines, are up more than 10% over last year. We too are experiencing higher vehicle and building repair costs, sometimes exacerbated by longer times for repair. Disruptions in the supply chain for things like vehicle sensors are a root cause of this. These inflationary cost increases are leading to higher claims severity than we contemplated in our pricing, driving a higher than expected combined ratio, which stands at 113.7 for the first half of 2022. Across the insurance sector, everyone is feeling the pinch. Where Erie differs, however, is in how we leverage the strength of our financial stability thanks to our policyholder surplus, which stands at $10.6 billion. The other good news is in the strong premium growth we're seeing, which was 8.6% for the quarter. Overall, policies and force grew by 3.1%, and our retention rate is also outstanding at 90.3% for personal and commercial lines combined. I'll now turn it over to Greg Gutting for a deeper review of our financials.