Erie Indemnity Company

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 NeCastro, President and Chief Executive Officer, and Julie Pelkowski, 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 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 filed yesterday and the related press release. This pre-recorded 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 will move on to Tim's remarks. Tim?

Thanks, Scott, and good morning, everyone. Before we get into our second quarter results, I'd like to take a moment to recognize two recent affirmations of the strength of Erie's business and the trust our customers continue to place in us. First, Erie Insurance ranked highest in customer satisfaction among large auto insurers in the J.D. Power 2026 U.S. Insurance Shopping Study. This marks the third consecutive year Erie has earned the top ranking. The study looks at insurance shopping experience across several important factors including the quote process, price, distribution channel, and policy offerings. To be recognized by customers in this way, particularly in a highly competitive market, is meaningful. It speaks to the value of our independent agency model and the care our agents and employees bring to helping customers make competent, informed decisions. We were also pleased to recently be ranked number 308 on the 2026 Fortune 500 list of America's largest corporations, moving up 15 spots from last year's ranking of 323. This year marks 23 years since Erie first appeared on the list. These affirmations of our service quality and financial strength are especially important in the context of today's market. As we shared in previous calls, 2025 was a challenging year for the industry and for Erie, particularly from a profitability perspective. We faced elevated weather activity, including the costliest weather event in our company's history, along with a complex and competitive market environment. In the first two quarters of this year, We've been pleased to see improvement and a more balanced picture emerging in our results. Here to share more details of your performance is Chief Financial Officer Julie Pelkowski. Julie?

Thank you, Tim, and good morning, everyone. Starting with the Erie Insurance Exchange, the insurance operations we manage. The second quarter of 2026 reflected continued progress in our underlying underwriting performance, with the combined ratio improving 13 points Thank you for joining us today. And as we anticipated, direct written premium growth continues to moderate as pricing has become more adequate and competitive pressures continue. While growth remains our primary challenge, we are committed to profitable growth. We continued the rollout of Erie Secure Auto, which was effective in our largest state of Pennsylvania in May. Other growth initiatives include targeted savings opportunities for eligible customers through programs such as TeamSpark. both of which Tim will discuss shortly. We remain focused on pricing discipline, implementing targeted rate reductions where indicated, but we aren't broadly lowering rates to drive growth. Now getting into the details, starting with growth, direct written premium grew 3.3% in the second quarter of 2026 compared to 9.2% in the second quarter of 2025. For the first six months of 2026, Direct Written Premium grew 3.4% compared to 11.4% in the same period last year. While our average premium per policy increased 6.8% from this time last year, growth in policies in force have continued to decrease slightly, down 2%. Our retention ratio also dropped slightly to 87.5%. From a profitability perspective, the exchange's combined ratio was 103.9% in the second quarter of 2026 compared to 116.9% in the second quarter of 2025. For the first six months of 2026, the combined ratio improved to 101.6% compared to 112.6% during the same period last year. As previously mentioned, catastrophe losses have improved. Year-to-date, our catastrophe losses are seven points better than the comparable prior year period, and our non-catastrophe losses improved almost three points from last year. Improved underwriting results and strong investment performance contributed to an increase in policyholder surplus at the end of June to approximately $10.7 billion. from approximately $10.1 billion at year-end 2025, reflecting the continued financial strength of the exchange. Shifting to the results for Indemnity, net income was $180 million or $3.45 per diluted share in the second quarter of 2026, compared to $175 million or $3.34 per diluted share in the second quarter of 2025. Year to date, net income was $331 million or $6.32 per diluted share compared to $313 million or $5.99 per diluted share during the first six months of 2025. Operating income increased approximately 2.5% to $204 million from $199 million in the second quarter of 2025. For the first six months of 2026, operating income increased 5.8% to $371 million from $351 million during the same period last year. Management fee revenue for policy issuance and renewal services grew approximately $39 million quarter to date, or 4.7%. Year to date, management fee revenue increased approximately $70 million, or 4.5%, compared to the first six months of 2025. Commission expense, our largest cost of operations, increased almost $45 million or 9.6% compared to the second quarter of 2025 and increased approximately $73 million or 8.1% compared to the first half of 2025. Increases in both periods were primarily driven by higher agent incentive compensation resulting from improved underwriting profitability as well as the growth in direct and affiliated assumed written premium. Non-commission expenses decreased approximately $9 million or 4.8% during the second quarter. Although personnel costs increased approximately $3 million due to higher incentive compensation driven by stronger performance metrics, it was partially offset by lower bonuses awarded to all employees. In 2025, we had a special all-employee bonus in recognition of our 100th anniversary. While personnel costs increased, the overall decrease in expenses for the quarter was driven by lower expenses in other categories, including sales and advertising, acquisition and underwriting support, professional fees, and administrative costs. For the first six months of 2026, Non-commission expenses decreased approximately $20 million, or 5%, compared to the first half of 2025. Personnel costs increased approximately $5 million, primarily due to higher incentive and base compensation, partially offset by the 2025 anniversary bonuses, as mentioned before. Similar to the second quarter, we also experienced lower expenses in all other categories of sales and advertising acquisition and underwriting support, professional fees, and administrative costs during the first six months of the year. Our investment income in the second quarter was $23 million compared to $20 million during the same period of 2025. For the first six months of 2026, investment income totaled $45 million compared to $39 million in the first half of last year. As always, we take a measured approach to capital management and maintain a strong balance sheet. For the first six months of 2026, our financial performance enabled us to pay our shareholders approximately $136 million in dividends. With that, I'll turn the call back over to Tim.