Erie Indemnity Co (ERIE) 2022 Q4 法說會逐字稿

Thank you, and welcome, everyone. We appreciate you joining us for this recorded discussion about our fourth quarter and year-end results. This recording will include remarks from Tim NeCastro, President and Chief Executive Officer; and Greg Gutting, Executive Vice President and Chief Financial Officer.

謝謝大家，歡迎大家。感謝您加入我們，參與有關我們第四季度和年終業績的錄製討論。該錄音將包括總裁兼首席執行官 Tim NeCastro 的講話；執行副總裁兼首席財務官 Greg Gutting。

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, insurance.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 these differences, please see the safe harbor statements in our Form 10-K filing with the SEC filed yesterday and in the related press release.

我們的收益發布和財務補充文件於昨天下午收市後發布，可在我們網站 insurance.com 的投資者關係部分獲取。在我們開始之前，我想提醒大家，今天的討論可能包含反映公司當前對未來事件的看法的前瞻性言論。這些評論基於受已知和意外風險和不確定性影響的假設。這些風險和不確定性可能導致結果與這些評論中描述的結果存在重大差異。有關可能導致這些差異的重要因素的信息，請參閱我們昨天向美國證券交易委員會提交的 10-K 表格文件和相關新聞稿中的安全港聲明。

This prerecorded call is the property of Erie Indemnity Company. It may not be reproduced or rebroadcast by any other party without the prior risk consent of the Erie Indemnity Company. With that, we'll move on to Tim's remarks. Tim?

此預先錄製的電話是 Erie Indemnity Company 的財產。未經伊利賠償公司事先風險同意，任何其他方不得複製或轉播。有了這個，我們將繼續蒂姆的評論。蒂姆？

Thanks, Scott, and thanks to all of you for taking time to learn more about Erie's performance in the fourth quarter of 2022 and our year-end results. As you're all aware, we find ourselves at a time of historic economic challenges. Inflation, supply chain issues and labor shortages to name just a few of the challenges have put substantial pressure on our bottom line, which we'll cover in more detail in a few minutes.

謝謝斯科特，也感謝大家花時間詳細了解伊利在 2022 年第四季度的表現和我們的年終業績。眾所周知，我們正處於歷史性經濟挑戰時期。通貨膨脹、供應鏈問題和勞動力短缺只是其中的幾個挑戰，給我們的底線帶來了巨大壓力，我們將在幾分鐘內詳細介紹。

Fortunately, our perseverance through 98 years of stability is helping us adapt to and withstand the current financial climate. Our ability to adapt has also helped us transition to new ways of working over the past year. Throughout 2022, we returned employees and welcome new hires to our offices.

幸運的是，我們98年穩定的毅力正在幫助我們適應和抵禦當前的金融環境。我們的適應能力也幫助我們在過去一年中過渡到新的工作方式。整個 2022 年，我們都有員工返崗並歡迎新員工來到我們的辦公室。

We also began resuming the in-person gatherings that have either been canceled or shifted to a virtual format for more than 2 years during the height of the pandemic. It's been a learning experience as we've introduced greater flexibility in how and where people collaborate and connect.

我們還開始恢復在大流行高峰期間已取消或轉為虛擬形式超過 2 年的面對面聚會。這是一次學習經歷，因為我們在人們協作和聯繫的方式和地點方面引入了更大的靈活性。

The majority of Erie employees are now working in a hybrid format, splitting their time between in-office and remote work. Many of our office spaces are now neighborhoods, a mixture of dedicated and flexible workspaces. And meeting rooms have been equipped with new technology that supports the experience of employees participating in both in person and virtually.

大多數 Erie 員工現在都採用混合模式工作，將時間分配在辦公室和遠程工作之間。我們的許多辦公空間現在都是社區，是專用和靈活工作空間的混合體。會議室配備了新技術，支持員工親自和虛擬參與的體驗。

It's clear that the world of work has changed significantly over the past 3 years, and the competition for talent continues. That's why gathering employee feedback is critical to making sure we're handling these returns the right way. We'll continue to learn and adapt to these new ways of working to ensure Erie remains an employer of choice in today's tight talent market while maintaining the culture, traditions and relationships that are so important to us and distinctive to our service brand.

很明顯，工作世界在過去 3 年發生了巨大變化，人才競爭仍在繼續。這就是為什麼收集員工反饋對於確保我們以正確的方式處理這些退貨至關重要。我們將繼續學習並適應這些新的工作方式，以確保 Erie 在當今緊張的人才市場中仍然是首選雇主，同時保持對我們非常重要且對我們的服務品牌來說與眾不同的文化、傳統和關係。

Before I share some additional updates from the past year, let's turn to our fourth quarter and year-end financial results. As I mentioned earlier, we are feeling the impact of the current economic climate, most notably in the combined ratio for Erie Insurance Exchange which was 116.1% for 2022 compared to 103.9% for 2021.

在我分享過去一年的一些額外更新之前，讓我們來看看我們的第四季度和年終財務業績。正如我之前提到的，我們感受到了當前經濟環境的影響，最明顯的是伊利保險交易所的綜合比率，2022 年為 116.1%，而 2021 年為 103.9%。

While we saw claims frequency remain slightly below pre-pandemic levels in the fourth quarter, we continue to see higher-than-usual severity. Auto repair costs are up 19.5% through December. The consumer price index was up 6.5% and more extreme weather events like hurricanes and owner storms are creating higher industry property losses.

雖然我們看到索賠頻率在第四季度仍略低於大流行前的水平，但我們仍然看到嚴重程度高於往常。截至 12 月，汽車維修成本上漲了 19.5%。消費者價格指數上漲 6.5%，颶風和業主風暴等更多極端天氣事件正在造成更高的工業財產損失。

Like the rest of the industry, we've responded to these economic challenges through rate increases, which we're doing with a measured approach along with expense management, adhering to our strict underwriting guidelines and agency profitability reviews. In this continued hard market, we know more customers will shop. While customers may be looking for a more attractive price they also demand a superior value proposition.

與業內其他公司一樣，我們通過加息來應對這些經濟挑戰，我們正在採取一種審慎的方法以及費用管理，遵守我們嚴格的承保指南和機構盈利能力審查。在這個持續艱難的市場中，我們知道會有更多的顧客購物。雖然客戶可能正在尋找更具吸引力的價格，但他們也需要卓越的價值主張。

That's something that Erie offers, and we're pleased to see that reflected in our growth numbers. Our top line growth was strong this past year as premium growth climbed an impressive 9.2% and new business premium increased 14.5%. Overall, policies in force are up 3.6% and our retention rate remains strong at over 90% for personal and commercial lines combined. With that, I'll pass it to Greg for a deeper review of the financials. Greg?

這就是伊利提供的東西，我們很高興看到這反映在我們的增長數字上。過去一年，我們的收入增長強勁，保費增長令人印象深刻，達到 9.2%，新業務保費增長 14.5%。總體而言，有效保單增長了 3.6%，我們的個人和商業保險保單保單保留率保持強勁，超過 90%。有了這個，我會把它傳遞給格雷格，以便對財務狀況進行更深入的審查。格雷格？

Thanks, Tim. As Tim alluded to at the beginning of this discussion, the Exchange, the insurance operations we manage, continues to see unprecedented loss costs related to claim severity driven by inflation. Because of this steep rise in claims cost, we have quickly adapted to become more agile, as in a way that still compels us to perform for our policyholders and agents.

謝謝，蒂姆。正如蒂姆在本次討論開始時提到的那樣，我們管理的保險業務交易所繼續看到與通貨膨脹驅動的索賠嚴重程度相關的前所未有的損失成本。由於理賠成本的急劇上升，我們迅速適應變得更加敏捷，這仍然迫使我們為保單持有人和代理人提供服務。

We have taken a more diligent approach to underwriting, and we've also taken a deeper look into our policy rate structures. All of these efforts are putting us in a position to deliver improved financial results as we are already seeing top line growth.

我們採取了更勤奮的承銷方式，也更深入地研究了我們的政策利率結構。所有這些努力都使我們能夠提供更好的財務業績，因為我們已經看到了收入增長。

The Exchange direct written premium growth for the fourth quarter was 12.1%, driven by an increase in the average premium per policy and increased policy retention. For the year, the Exchange saw an increase in direct written premiums of 9.2% compared to 2021. The increase was driven by strong new policy growth of 3.7% and an increase in new direct written premium of 14.5%, combined with increased policy retention.

第四季度交易所直接承保保費增長 12.1%，這是受每份保單平均保費增加和保單保留率增加的推動。與 2021 年相比，該交易所今年的直接承保保費增長了 9.2%。這一增長是由 3.7% 的強勁新保單增長和 14.5% 的新直接承保保費增長以及保單保留率的增加所推動的。

Turning to the results for indemnity. Net income was over $65 million or $1.25 per diluted share in the fourth quarter of 2022 compared to $55 million or $1.05 per diluted share in the fourth quarter of 2021. We 2022 total year net income was $299 million or $5.71 per diluted share compared to $298 million or $5.69 per diluted share in 2021. Operating income in the fourth quarter increased nearly $20 million or 31.7% compared to the fourth quarter of 2021.

轉向賠償的結果。 2022 年第四季度淨收入超過 6500 萬美元或攤薄後每股收益 1.25 美元，而 2021 年第四季度為 5500 萬美元或攤薄後每股收益 1.05 美元。我們 2022 年全年淨收入為 2.99 億美元或攤薄後每股收益 5.71 美元，而 298 美元百萬美元或 2021 年攤薄後每股收益 5.69 美元。與 2021 年第四季度相比，第四季度營業收入增加近 2000 萬美元或 31.7%。

From a total year perspective, Indemnity experienced an increase in operating income of $58 million or 18.3% compared to 2021. Management fee revenue from policy issuance and renewal services increased over $53 million or 11.8% in the fourth quarter of 2022 compared to the fourth quarter of 2021, and almost $175 million or 9.1% for the total year compared to 2021.

從全年來看，Indemnity 的營業收入比 2021 年增加了 5800 萬美元，增幅為 18.3%。2022 年第四季度，來自保單簽發和續簽服務的管理費收入比第四季度增加了 5300 萬美元以上，增幅為 11.8% 2021 年，與 2021 年相比全年增長近 1.75 億美元或 9.1%。

The increases in both the fourth quarter and total year were driven by increases in the direct and assumed written premiums of the Exchange. The total cost of operations from policy issuance and renewal services increased $35 million for the fourth quarter and over $118 million for the total year 2022 compared to the same periods in 2021.

第四季度和全年的增長都是由交易所的直接保費和假定承保保費的增長推動的。與 2021 年同期相比，第四季度保單簽發和續簽服務的總運營成本增加了 3500 萬美元，2022 年全年的總運營成本增加了 1.18 億美元。

Commission expenses for the fourth quarter grew $16 million while the total year commission expense increased $71 million. Similar to the management fees, the increase in both the fourth quarter and total year were driven by an increase in the direct and affiliated assumed written premiums.

第四季度的佣金支出增加了 1600 萬美元，而全年佣金支出增加了 7100 萬美元。與管理費類似，第四季度和全年的增長都是由直接和附屬承保保費的增長推動的。

Turning to our noncommission expenses. For the fourth quarter, Indemnity saw an increase of over $19 million compared to the fourth quarter of 2021. The fourth quarter increase was driven by increases in underwriting and policy processing costs, information technology costs, sales and advertising costs and administrative and other costs.

談到我們的非佣金費用。第四季度，賠償金比 2021 年第四季度增加了超過 1900 萬美元。第四季度的增長是由於承保和政策處理成本、信息技術成本、銷售和廣告成本以及行政和其他成本的增加。

For the total year 2022, noncommission expense grew by $47 million compared to 2021. Underwriting and policy processing costs increased $6 million, driven by personnel costs as well as underwriting report costs. Information technology costs grew $13 million due to increased hardware and software costs as well as personnel costs.

在 2022 年全年，與 2021 年相比，非佣金支出增加了 4700 萬美元。承保和政策處理成本增加了 600 萬美元，這是由人員成本和承保報告成本推動的。由於硬件和軟件成本以及人員成本的增加，信息技術成本增加了 1300 萬美元。

Sales and advertising costs increased $7 million due to increased advertising and agent-related costs. And finally, administrative and other expenses increased nearly $23 million driven by personnel costs related to compensation and increased professional fees.

由於廣告和代理相關成本的增加，銷售和廣告成本增加了 700 萬美元。最後，由於與薪酬相關的人員成本和專業費用增加，行政和其他費用增加了近 2300 萬美元。

Indemnity's fourth quarter pretax income from investments totaled $300,000. This represents a decrease of roughly $12 million compared to the fourth quarter of 2021. The decrease was driven by losses in limited partnership investments.

Indemnity 第四季度的稅前投資收入總計 300,000 美元。這比 2021 年第四季度減少了約 1200 萬美元。減少的原因是有限合夥投資的虧損。

Indemnity's total year pretax income from investments with just over $600,000, a decrease of $67 million compared to 2021. The large decrease is attributable to losses in our limited partnership portfolio of $10 million recorded in 2022 compared to earnings unlimited partnerships of $32 million recorded in 2021.

Indemnity 來自剛剛超過 600,000 美元投資的稅前總收入，與 2021 年相比減少了 6,700 萬美元。大幅減少的原因是我們的有限合夥投資組合在 2022 年錄得 1,000 萬美元的虧損，而 2021 年錄得的無限合夥收益為 3,200 萬美元.

Indemnity also incurred $27 million in realized and unrealized losses in 2022 compared to gains of $5 million recorded in 2021. I will remind you that the limited partnership asset classes and runoff, and we continue to expect more limited and inconsistent earnings from this asset class in the future.

與 2021 年記錄的收益 500 萬美元相比，賠償在 2022 年還產生了 2700 萬美元的已實現和未實現損失。我要提醒您，有限合夥資產類別和徑流，我們繼續預計該資產類別在未來。

Finally, in 2022, we paid our shareholders dividends in the amount of $207 million. Also in December of last year, our Board approved a 7.2% increase in the regular quarterly cash dividend for both Class A and Class B shares for 2023. Now I'll turn the call back over to Tim. Tim?

最後，在 2022 年，我們向股東支付了 2.07 億美元的股息。同樣在去年 12 月，我們的董事會批准將 2023 年 A 類和 B 類股票的常規季度現金股息增加 7.2%。現在我將電話轉回蒂姆。蒂姆？

Thank you, Greg. Technology has not only become vital to how our workforce connects, but it's also an integral part of how we do business. This isn't new to us, but the speed and focus of technology has certainly been heightened over the past 3 years.

謝謝你，格雷格。技術不僅對我們的員工如何联系變得至關重要，而且它也是我們開展業務的不可或缺的一部分。這對我們來說並不新鮮，但在過去 3 年中，技術的速度和重點肯定得到了提高。

Erie's strategy in essence is to modernize our business model with greater digital capabilities while continue our investment in one of our most unique assets: our independent agency force. And because of the pace of technology, we're focused on acceleration and agility to get that strategic work done. This means working faster, working smarter and being nimble. It also means setting objectives and tracking key results to ensure we're hitting goals and time lines, engaging the effectiveness and success of our overall strategy.

伊利的戰略本質上是通過更強大的數字能力使我們的商業模式現代化，同時繼續投資我們最獨特的資產之一：我們的獨立代理隊伍。由於技術的發展速度，我們專注於加速和敏捷性來完成戰略工作。這意味著工作更快、工作更聰明、更靈活。它還意味著設定目標和跟踪關鍵結果，以確保我們達到目標和時間表，使我們的整體戰略取得成效和成功。

Not only will this allow us to modernize legacy platforms and bring new products and services to market more quickly, but shorter run times for major projects and initiatives will also lead to expense reductions. This accelerated agile approach was used to launch a recent pilot for a new online quoting and agent routing program called [cold flow]. This aims to capture more digital prospects through a more streamlined quoting process, combined with personal interaction with an Erie agent.

這不僅使我們能夠對遺留平台進行現代化改造並更快地將新產品和服務推向市場，而且縮短重大項目和計劃的運行時間也將導致費用減少。這種加速的敏捷方法被用於啟動一個名為 [cold flow] 的新在線報價和代理路由程序的最新試點。這旨在通過更簡化的報價流程，結合與伊利代理商的個人互動，捕捉更多的數字化前景。

It brings together the technology to meet customers where they are, with the human touch that differentiates Erie from the competition, which is exactly what our strategy is about. Following the pilot, we expect to expand the program to more agencies throughout 2023.

它匯集了技術來滿足客戶的需求，並以人性化的方式使伊利在競爭中脫穎而出，這正是我們的戰略所在。在試點之後，我們預計將在 2023 年將該計劃擴展到更多機構。

We also continue to invest in our new and enhanced ways to serve our existing customers. Our online account platform, which acts as a digital self-service tool for customers is now used by more than 1 million households, and chat services have become a popular feature of the customer experience. More than 22,000 conversations were handled by digital services team last year, an increase of more than 200% over 2021.

我們還繼續投資於新的和增強的方式來為我們現有的客戶提供服務。我們的在線賬戶平台作為客戶的數字自助服務工具，現已被超過 100 萬戶家庭使用，聊天服務已成為客戶體驗中的熱門功能。去年，數字服務團隊處理了超過 22,000 次對話，比 2021 年增長了 200% 以上。

Based on recent survey data, customers rated the tool an average of 4.7 out of 5. 2 new products launched in 2022 are also showing promising early results. The combined Cyber Suite coverage, which protects businesses against cyber attacks, now covers more than 11,000 ErieSecure Business customers; and Extended Water Coverage, which was piloted in 2 states in early 2022 and roll off to 10 states within our footprint in the second half of the year, has been added to nearly 14,000 policies so far, protecting customers against certain types of water damage.

根據最近的調查數據，客戶對該工具的平均評分為 4.7 分（滿分 5 分）。2022 年推出的 2 款新產品也顯示出令人鼓舞的早期成果。保護企業免受網絡攻擊的 Cyber Suite 組合覆蓋範圍現在覆蓋了 11,000 多個 ErieSecure Business 客戶； 2022 年初在 2 個州進行了試點，並於今年下半年擴展到我們覆蓋範圍內的 10 個州，到目前為止，已將其添加到近 14,000 份保單中，以保護客戶免受某些類型的水災。

As we've always done, we're developing and refining these new products and services alongside our independent agents. The relationship we have with our agency force is unparalleled. We place a high priority on seeking their input, recognizing their successes and making sure they have the very best products, technology and business processes in place.

正如我們一直所做的那樣，我們正在與我們的獨立代理商一起開發和完善這些新產品和服務。我們與代理團隊的關係是無與倫比的。我們高度重視尋求他們的意見，認可他們的成功並確保他們擁有最好的產品、技術和業務流程。

These efforts were recognized recently when Erie was ranked highest among personal lines insurers in the J.D. Power 2022 U.S. Independent Agent Satisfaction Study released in October. This is the second year in a row the independent property casualty insurance agents have rated Erie highest in satisfaction. Our independent agent distribution model has been a key driver of our success for nearly 100 years, and we will continue to build on that creation of trust and collaboration as we move into our second century.

這些努力最近得到認可，伊利在 10 月發布的 J.D. Power 2022 美國獨立代理人滿意度研究中名列個人保險保險公司中最高。這是獨立財產意外保險代理人連續第二年將伊利評為最高滿意度。近 100 年來，我們的獨立代理分銷模式一直是我們成功的關鍵驅動力，隨著我們進入第二個世紀，我們將繼續建立這種信任和協作的基礎。

Before we close, I do want to acknowledge some changes to our executive team that have been announced since our last call. As we shared publicly in November, Executive Vice President and Chief Financial Officer, Greg Gutting, will be retiring at the end of April. Greg is a familiar voice on this call, and he's been an extremely valuable member of our executive team, both for the wise financial perspective and expertise he offers and the institutional gained in his nearly 40-year career in Erie. His partnership will be truly missed.

在我們結束之前，我確實想確認自上次電話會議以來我們的執行團隊已經宣布的一些變化。正如我們在 11 月公開分享的那樣，執行副總裁兼首席財務官 Greg Gutting 將於 4 月底退休。格雷格在這次電話會議上是一個熟悉的聲音，他一直是我們執行團隊中非常有價值的成員，無論是因為他提供的明智的財務觀點和專業知識，還是因為他在伊利近 40 年的職業生涯中獲得的製度。他的伙伴關係將真正被懷念。

Julie Pelkowski will succeed Greg to become Executive Vice President and Chief Financial Officer on May 1. Julie currently serves as Senior Vice President of our Enterprise Office. Prior to taking on that leadership role last year, Julie served as Senior Vice President and Controller. She began her career in 1991 with Deloitte & Touche and joined Erie in 1998 as an internal auditor before moving into various leadership roles within our finance division. Julie's years of exceptional leadership have positioned us strongly for the future.

Julie Pelkowski 將於 5 月 1 日接替 Greg 成為執行副總裁兼首席財務官。Julie 目前擔任我們企業辦公室的高級副總裁。在去年擔任該領導職務之前，朱莉擔任高級副總裁兼財務總監。她於 1991 年在 Deloitte & Touche 開始了她的職業生涯，並於 1998 年加入 Erie，擔任內部審計師，之後在我們的財務部門擔任各種領導職務。朱莉多年卓越的領導力為我們的未來奠定了堅實的基礎。

Finally, we welcome to our executive team, Sean Dugan. Sean was promoted to Executive Vice President of Human Resources and Corporate Services on January 1. Since 2020, Sean has led our Human Resources as Senior Vice President. And prior to that, he held the position of Corporate Human Resources Officer. His 30-year Erie career includes leadership roles, corporate training and development, talent acquisition and community outreach. Sean's expertise in both business and support functions and his deep knowledge of the organization is a tremendous asset to our executive team.

最後，我們歡迎加入我們的執行團隊 Sean Dugan。肖恩於 1 月 1 日晉升為人力資源和企業服務執行副總裁。自 2020 年以來，肖恩一直擔任我們的人力資源高級副總裁。在此之前，他擔任公司人力資源官一職。他在 Erie 的 30 年職業生涯包括領導角色、企業培訓和發展、人才招聘和社區外展。 Sean 在業務和支持職能方面的專業知識以及他對組織的深入了解對我們的執行團隊來說是一筆巨大的財富。

As always, I'd like to thank our employees and agents for their dedication to our above all and service commitment, our shareholders for their continued support and trust and all of you, for your continued interest in Erie. Thank you all for listening in today.

一如既往，我要感謝我們的員工和代理人對我們最重要的服務承諾的奉獻，感謝我們的股東一直以來的支持和信任，感謝大家對伊利的持續關注。謝謝大家今天的收聽。

Ladies and gentlemen, this concludes the program. Thank you for your participation. You may now disconnect.

女士們，先生們，節目到此結束。感謝您的參與。您現在可以斷開連接。