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Financial Data and Key Metrics - Net income for Erie Indemnity Company reached an all-time high of more than $446 million in 2023, compared to $299 million in 2022 [5] - Growth for Erie Insurance Exchange hit a 20-year high of 17%, reaching $10 billion in premiums in Q4 2023 [5] - Policyholder surplus ended at $9.3 billion in December 2023, with a $203 million increase in Q4 [6] - Combined ratio for the year ended at 119.1%, an improvement from September year-to-date but 3 points higher than year-end 2022 [6][19] - Management fee revenue increased by $98 million (19.5%) in Q4 2023 and $354 million (17%) for the full year compared to 2022 [7] - Pre-tax income from investments was $29 million in 2023, compared to $600,000 in 2022 [9] Business Line Data and Key Metrics - New business premium grew over 43% in Q4 2023 and almost 38% for the year compared to the prior year [7] - Non-commission expenses grew by $1 million in Q4 2023 and $47 million for the full year, driven by technology and customer service investments [8] - Commission expenses grew by $53 million in Q4 2023 and $169 million for the full year, driven by increased premiums [22] - Underwriting and policy processing costs increased by $9.4 million due to growth in the number of policies [23] Market Data and Key Metrics - Weather-related claims rose to nearly 70,000 in 2023, compared to roughly 50,000 in 2022 [19] - Retention levels remained strong at 91.2% despite rate increases [20] - Erie ranked number one in home insurance customer satisfaction by J.D. Power, with a score of 856, 37 points higher than the segment average [1][14] Company Strategy and Industry Competition - The company is modernizing legacy platforms, with a 75% reduction in system outage time after migrating Erie Claim Center to the cloud [11] - Investments in technology and customer service are aimed at long-term expense savings and innovation [25] - Erie Strategic Ventures, formed in 2022, focuses on investing in the personal and commercial insurance value chain [13] - The company is implementing rate increases and reinforcing underwriting standards to improve profitability [19] Management Commentary on Operating Environment and Future Outlook - The company faced significant challenges from economic and environmental pressures but achieved record growth [5] - Management expects long-term savings from modernization efforts and new digital capabilities [19] - The company is optimistic about the benefits of recent rate increases and strong retention levels [20] Other Important Information - The company paid $222 million in dividends in 2023 and approved a 7.1% increase in the 2024 regular quarterly cash dividend [24] - Erie launched a refreshed workers' compensation platform across all states in its footprint, with over 75 enhancements in 2023 [26][27] - Initial startup investments include Wagmo, Roots Automation, and Trust & Will, aimed at delivering value to Erie and its stakeholders [28] Q&A Session - No Q&A session was held as the call was prerecorded [4]

PART I [ITEM 1. Business](index=4&type=section&id=Item%201.%20Business) Erie Indemnity Company serves as attorney-in-fact for Erie Insurance Exchange, managing operations and earning fees, with a focus on human capital and regulatory compliance - Erie Indemnity Company (Indemnity) serves as the attorney-in-fact for the Erie Insurance Exchange (Exchange), providing policy issuance, renewal, claims handling, and investment management services[11](index=11&type=chunk)[12](index=12&type=chunk) - Indemnity's primary revenue source is a management fee, calculated as a percentage (not exceeding **25%**) of direct and affiliated assumed premiums written by the Exchange[12](index=12&type=chunk)[15](index=15&type=chunk) - The Exchange's business is segmented into personal lines (**70%** of 2023 premiums) and commercial lines (**30%**), distributed exclusively through independent agencies[16](index=16&type=chunk)[17](index=17&type=chunk)[18](index=18&type=chunk) - Indemnity's human capital strategy emphasizes attracting, retaining, and developing talent through a positive employee value proposition, including competitive pay, comprehensive benefits, work/life balance, and professional development opportunities[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk) - Diversity, Equity & Inclusion (DEI) is a core business strategy, led by a Chief Diversity Officer, with initiatives like a Future Focus internship program and nine affinity networks to foster an inclusive workplace[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) Workforce Metrics (Years ended December 31) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Full-time workforce size | 6,481 | 5,970 | 5,805 | | Part-time workforce size | 24 | 23 | 30 | | Temporary workforce size | 51 | 45 | 41 | | Turnover | 9.0 % | 11.2 % | 8.0 % | | Voluntary turnover | 4.8 % | 6.9 % | 4.8 % | | Retirements | 2.8 % | 3.6 % | 2.2 % | | Average tenure (years) | 10.4 | 11.7 | 12.6 | - Indemnity and the Exchange, along with its subsidiaries, operate as an insurance holding company system, subject to extensive state insurance regulations requiring fairness and reasonableness in intercompany transactions and prior approval for material amendments[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) [ITEM 1A. Risk Factors](index=8&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from its dependence on the Exchange, operational challenges, and market, capital, and liquidity factors - Risks are categorized into those related to the Erie Insurance Exchange (dependence on management fees, premium growth, financial condition), operating risks (service costs, talent, technology, cybersecurity), and market, capital, and liquidity risks (investment portfolio, financial obligations)[44](index=44&type=chunk) - A reduction in the management fee rate or a significant decrease in direct and affiliated assumed premiums written by the Exchange could materially adversely affect revenues and profitability[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) - The Exchange faces significant competition, macroeconomic condition impacts, and risks related to its independent agency distribution channel and brand reputation, all of which could impair its ability to grow and renew business, thereby affecting Indemnity's management fee revenue[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) - The Exchange's financial condition is crucial, with risks including failure to maintain acceptable financial strength ratings (currently **A+ 'Superior'**), investment portfolio performance (fixed income, equity, limited partnerships), extensive regulatory supervision, and litigation[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk) - Operating risks include controlling service costs (commissions, employee, technology), attracting and retaining talent, maintaining system availability, managing technology initiatives (including AI), and mitigating difficulties with technology, data, and network security (cyber attacks, third-party reliance)[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk) - Market, capital, and liquidity risks are tied to the performance of Indemnity's investment portfolio (**85%** fixed maturity, **15%** equity/other), which is subject to interest rate, credit, sector/concentration, and liquidity risks. Failure to accurately estimate capital needs or market volatility could impact liquidity and access to capital[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk) [ITEM 1B. Unresolved Staff Comments](index=14&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments from the SEC - There are no unresolved staff comments[85](index=85&type=chunk) [ITEM 1C. Cybersecurity](index=14&type=section&id=Item%201C.%20Cybersecurity) The company maintains a robust cybersecurity program aligned with NIST, overseen by a dedicated committee, with no material breaches reported - Cybersecurity risk management is overseen by the Privacy and Information Security Committee, reporting to the Executive Council and Board of Directors[86](index=86&type=chunk)[88](index=88&type=chunk)[89](index=89&type=chunk) - The cybersecurity program aligns with the NIST Cybersecurity Framework, focusing on identification, protection, detection, response, and recovery from threats, including annual risk assessments and third-party validations[87](index=87&type=chunk) - A Core Incident Response Team, with specialized leaders (CISO, Privacy leader, Legal leader) and augmented by internal and external experts, is responsible for analyzing and responding to cyber incidents[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) - To date, the company is not aware of any cybersecurity breach or incident that would have a material impact on its business strategy, results of operations, or financial condition[93](index=93&type=chunk) [ITEM 2. Properties](index=15&type=section&id=Item%202.%20Properties) The company shares a 996,000 square foot corporate campus and 25 field offices with the Exchange, with costs allocated by occupied space - Indemnity and the Exchange share a corporate home office campus in Erie, Pennsylvania, totaling approximately **996,000 square feet**[94](index=94&type=chunk) - The entities own or lease **25 field offices** in **12 states**, primarily supporting claims activities, with rental costs for shared facilities allocated by square footage[95](index=95&type=chunk) [ITEM 3. Legal Proceedings](index=16&type=section&id=Item%203.%20Legal%20Proceedings) The company is vigorously defending a class action lawsuit alleging breaches of fiduciary duty regarding its management fee, with a petition pending before the Supreme Court - Erie Indemnity Company is a defendant in a class action lawsuit alleging breaches of fiduciary duty concerning the setting of its management fee from the Erie Insurance Exchange[96](index=96&type=chunk)[97](index=97&type=chunk)[101](index=101&type=chunk) - The lawsuit seeks damages, disgorgement of profits, or other injunctive relief for the period starting two years prior to August 24, 2021, and continuing through 2021[97](index=97&type=chunk)[98](index=98&type=chunk)[102](index=102&type=chunk) - The case has undergone several procedural changes, including removal to federal court, voluntary dismissal, refiling, remand to state court, and appeals, with a Petition for Writ of Certiorari currently pending before the Supreme Court of the United States[99](index=99&type=chunk)[100](index=100&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk) - Indemnity intends to vigorously defend against all allegations and has filed a separate complaint in Federal Court to protect prior binding judgments in its favor[103](index=103&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk) [ITEM 4. Mine Safety Disclosures](index=17&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine Safety Disclosures are not applicable to the registrant - Mine Safety Disclosures are not applicable to the registrant[110](index=110&type=chunk) PART II [ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=18&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Class A common stock trades on NASDAQ, Class B is closely held, with historical dividends and a $150 million repurchase program having $17.8 million remaining - Class A common stock (ERIE) trades on NASDAQ, while Class B voting common stock has no active market and is closely held[113](index=113&type=chunk) - The company historically pays quarterly cash dividends, with future payments dependent on operating results, financial condition, cash requirements, and business conditions[113](index=113&type=chunk) Stock Performance (Cumulative Total Shareholder Return, $100 invested) | Year | Erie Indemnity Company Class A common stock | Standard & Poor's 500 Stock Index | Standard & Poor's Supercomposite Insurance Industry Group Index | | :--- | :--- | :--- | :--- | | 2018 | $100 | $100 | $100 | | 2019 | $127 | $131 | $128 | | 2020 | $194 | $156 | $127 | | 2021 | $155 | $200 | $163 | | 2022 | $205 | $164 | $178 | | 2023 | $281 | $207 | $196 | - A stock repurchase program for Class A common stock, authorized for **$150 million** in 2011 with no time limitation, had approximately **$17.8 million** remaining as of December 31, 2023[119](index=119&type=chunk)[120](index=120&type=chunk) Issuer Purchases of Equity Securities (Quarter ending December 31, 2023) | Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced program | Dollar value of shares that may yet be purchased under the program | | :--- | :--- | :--- | :--- | :--- | | October 1–31, 2023 | — | $— | — | $17,754 | | November 1–30, 2023 | 1,258 | $277.03 | — | $17,754 | | December 1–31, 2023 | — | $— | — | $17,754 | | Total | 1,258 | $277.03 | — | | - The **1,258 shares** purchased in November 2023 were for funding the rabbi trust for the outside director deferred stock compensation plan, not the publicly announced repurchase program[120](index=120&type=chunk) [ITEM 6. Selected Financial Data](index=19&type=section&id=Item%206.%20Selected%20Financial%20Data) Selected Financial Data is not applicable to the company - Selected Financial Data is not applicable[122](index=122&type=chunk) [ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the company's financial condition and operations, focusing on management fees, economic impacts, accounting estimates, and liquidity [Cautionary Statement Regarding Forward-Looking Information](index=20&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Information) Forward-looking statements are subject to risks and uncertainties, and the company disclaims any obligation to update them - Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially, including dependence on the Exchange, economic conditions, competition, talent retention, technology, and regulatory changes[125](index=125&type=chunk)[126](index=126&type=chunk) - The company undertakes no obligation to publicly update or revise any forward-looking statement[127](index=127&type=chunk) [Recent Accounting Standards](index=21&type=section&id=Recent%20Accounting%20Standards) The company is evaluating new accounting standards for segment reporting and income tax disclosures, with no expected financial statement impact - The company is evaluating the impact of ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Tax Disclosures) on its disclosures, with no expected impact on financial statements[128](index=128&type=chunk)[279](index=279&type=chunk)[280](index=280&type=chunk) [Operating Overview](index=21&type=section&id=Operating%20Overview) The company's operating overview highlights its role as attorney-in-fact, management fee revenue, and the impact of economic conditions on financial performance - Erie Indemnity Company acts as the managing attorney-in-fact for the Erie Insurance Exchange, providing policy issuance, renewal, and administrative services[129](index=129&type=chunk) - Management fee revenue, the primary driver of earnings, is based on direct and affiliated assumed premiums written by the Exchange and a management fee rate, which was set at **25%** for 2021, 2022, 2023, and 2024[131](index=131&type=chunk)[132](index=132&type=chunk)[135](index=135&type=chunk) Financial Overview (Years ended December 31, in thousands, except per share data) | Metric | 2023 | % Change | 2022 | % Change | 2021 | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating income | $520,256 | 38.3 % | $376,214 | 18.3 % | $318,097 | | Total investment income | $28,968 | NM | $632 | (99.1) % | $67,332 | | Interest expense, net | $— | NM | $2,009 | (51.4) % | $4,132 | | Other income (expense) | $12,712 | NM | $1,615 | NM | $(4,893) | | Income before income taxes | $561,936 | 49.3 % | $376,452 | 0.0 % | $376,404 | | Income tax expense | $115,875 | 48.8 % | $77,883 | (0.8) % | $78,544 | | Net income | $446,061 | 49.4 % | $298,569 | 0.2 % | $297,860 | | Net income per share - diluted | $8.53 | 49.4 % | $5.71 | 0.3 % | $5.69 | - Operating income increased significantly in 2023 (**38.3%**) due to operating revenue growth outpacing expense growth. Net income also saw a substantial increase of **49.4%** in 2023[137](index=137&type=chunk) - Direct and affiliated assumed premiums written by the Exchange increased **17.0%** to **$10.1 billion** in 2023 and **9.2%** to **$8.6 billion** in 2022[137](index=137&type=chunk) - Cost of operations for policy issuance and renewal services increased **12.0%** in 2023 and **7.0%** in 2022, driven by higher scheduled commissions, employee compensation, and technology costs, partially offset by decreased agent incentive compensation[138](index=138&type=chunk) - Total investment income increased by **$28.3 million** in 2023, primarily due to lower net realized and unrealized investment losses and an increase in net investment income[140](index=140&type=chunk) - Unfavorable economic conditions (inflation, high unemployment, recession threat) and financial market volatility could adversely affect the Exchange's premium revenue and Indemnity's management fees and investment portfolio[142](index=142&type=chunk)[143](index=143&type=chunk) [Critical Accounting Estimates](index=23&type=section&id=Critical%20Accounting%20Estimates) Critical accounting estimates involve investment valuation, including fair value measurements and impairments, and retirement benefit plans - Critical accounting estimates include investment valuation (fair value measurements, impairments) and retirement benefit plans for employees (pension obligations, discount rates, expected return on assets)[144](index=144&type=chunk)[145](index=145&type=chunk) - Fair value measurements for investments are primarily classified as Level 2, using observable inputs from industry-standard models[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk) - Impairments on fixed maturity and equity portfolios are regularly monitored, with credit-related or intent-to-sell impairments recognized in earnings[152](index=152&type=chunk) - Pension plan obligations are based on actuarial estimates, with key assumptions including discount rates (**5.34%** for 2023 PBO) and expected rates of return on plan assets (increased to **7.00%** for 2024)[155](index=155&type=chunk)[156](index=156&type=chunk)[159](index=159&type=chunk) - A **25 basis point** decrease in the discount rate would increase pension cost by **$4.1 million** and the pension benefit obligation by **$37.2 million**[156](index=156&type=chunk) - The company recognized net pension benefit income of **$3.8 million** in 2023, primarily due to higher discount rates and expected return on assets, and projects **$4.3 million** in 2024[161](index=161&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) This section details revenue allocation, premium growth drivers, expense trends, and investment income performance - Management fee revenue is allocated between policy issuance and renewal services (recognized at policy issuance/renewal) and administrative services (recognized over a four-year period)[164](index=164&type=chunk)[165](index=165&type=chunk) Revenue Allocation and Disaggregation (Years ended December 31, in thousands) | Revenue Category | 2023 | % Change | 2022 | % Change | 2021 | | :--- | :--- | :--- | :--- | :--- | :--- | | Management fee revenue - policy issuance and renewal services | $2,442,073 | 17.0 % | $2,087,846 | 9.1 % | $1,913,166 | | Management fee revenue - administrative services | $63,669 | 9.2 % | $58,323 | 0.1 % | $58,286 | | Administrative services reimbursement revenue | $737,139 | 10.3 % | $668,268 | 4.7 % | $638,483 | | Total revenue from administrative services | $800,808 | 10.2 % | $726,591 | 4.3 % | $696,769 | - Direct and affiliated assumed premiums written by the Exchange increased **17.0%** to **$10.1 billion** in 2023, driven by a **6.9%** increase in policies in force and a **9.4%** increase in average premium per policy[168](index=168&type=chunk) - New business premiums increased **37.9%** to **$1.5 billion** in 2023, while renewal business premiums increased **13.9%** to **$8.5 billion**[169](index=169&type=chunk)[170](index=170&type=chunk) - The Exchange implemented rate increases in 2021, 2022, and 2023 due to increased claims frequency and inflation-driven severity, with full recognition taking 12-24 months[171](index=171&type=chunk)[172](index=172&type=chunk) Policy Issuance and Renewal Services (Years ended December 31, in thousands) | Metric | 2023 | % Change | 2022 | % Change | 2021 | | :--- | :--- | :--- | :--- | :--- | :--- | | Management fee revenue - policy issuance and renewal services | $2,442,073 | 17.0 % | $2,087,846 | 9.1 % | $1,913,166 | | Service agreement revenue | $26,059 | 1.4 % | $25,687 | 6.8 % | $24,042 | | Total revenue | $2,468,132 | 16.8 % | $2,113,533 | 9.1 % | $1,937,208 | | Cost of operations - policy issuance and renewal services | $2,011,545 | 12.0 % | $1,795,642 | 7.0 % | $1,677,397 | | Operating income - policy issuance and renewal services | $456,587 | 43.6 % | $317,891 | 22.4 % | $259,811 | - Commissions, the largest expense, increased by **$169.0 million** in 2023 due to premium growth, partially offset by decreased agent incentive compensation from higher claims severity[182](index=182&type=chunk)[183](index=183&type=chunk) - Non-commission expenses increased by **$46.9 million** in 2023, driven by higher underwriting, IT, and administrative personnel costs, and increased incentive plan awards[184](index=184&type=chunk) Administrative Services (Years ended December 31, in thousands) | Metric | 2023 | % Change | 2022 | % Change | 2021 | | :--- | :--- | :--- | :--- | :--- | :--- | | Management fee revenue - administrative services | $63,669 | 9.2 % | $58,323 | 0.1 % | $58,286 | | Administrative services reimbursement revenue | $737,139 | 10.3 % | $668,268 | 4.7 % | $638,483 | | Total revenue allocated to administrative services | $800,808 | 10.2 % | $726,591 | 4.3 % | $696,769 | | Administrative services expenses | | | | | | | Claims handling services | $635,043 | 10.1 % | $576,799 | 5.5 % | $546,962 | | Investment management services | $34,958 | (5.0) % | $36,795 | (5.3) % | $38,862 | | Life management services | $67,138 | 22.8 % | $54,674 | 3.8 % | $52,659 | | Operating income - administrative services | $63,669 | 9.2 % | $58,323 | 0.1 % | $58,286 | - Administrative services expenses and reimbursements are reported gross, with reimbursements settled at cost monthly, having no net impact on operating income[134](index=134&type=chunk)[139](index=139&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk) Total Investment Income (Years ended December 31, in thousands) | Metric | 2023 | % Change | 2022 | % Change | 2021 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net investment income | $44,572 | 55.9 % | $28,585 | (54.0) % | $62,177 | | Net realized and unrealized investment (losses) gains | $(5,838) | 78.6 % | $(27,286) | NM | $4,946 | | Net impairment (losses) recoveries recognized in earnings | $(9,766) | NM | $(667) | NM | $209 | | Total investment income | $28,968 | NM | $632 | (99.1) % | $67,332 | - Net investment income increased by **$16.0 million** in 2023 due to higher bond and cash equivalent income from increased yields and rates[191](index=191&type=chunk) - Net realized and unrealized investment losses decreased to **$5.8 million** in 2023 from **$27.3 million** in 2022, partially offset by market value adjustment gains on equity securities[192](index=192&type=chunk) - Net impairment losses were **$9.8 million** in 2023, including **$7.3 million** for real estate development loans and **$2.4 million** for available-for-sale securities[193](index=193&type=chunk) [Financial Condition of Erie Insurance Exchange](index=31&type=section&id=Financial%20Condition%20of%20Erie%20Insurance%20Exchange) The Erie Insurance Exchange maintains a strong A+ 'Superior' financial strength rating, with significant premium growth and high policy retention - The Exchange and its subsidiaries hold an **A+ 'Superior'** financial strength rating from A.M. Best, the second highest rating, with a stable outlook affirmed on August 10, 2023[195](index=195&type=chunk) - Statutory direct written premiums grew **17.0%** to **$10.1 billion** in 2023, and policyholders' surplus was **$9.3 billion** at December 31, 2023[196](index=196&type=chunk) - The year-over-year policy retention ratio remained high at **91.2%** in 2023[196](index=196&type=chunk) [Financial Condition](index=32&type=section&id=Financial%20Condition) The company's investment portfolio, primarily fixed maturities, is managed for risk-adjusted returns and continuously reviewed for impairment - The investment portfolio is managed to maximize after-tax returns on a risk-adjusted basis, with continuous review for impairment[199](index=199&type=chunk)[201](index=201&type=chunk) Investment Portfolio Carrying Value (December 31, in thousands) | Investment Type | 2023 | % to total | 2022 | % to total | | :--- | :--- | :--- | :--- | :--- | | Fixed maturities | $961,241 | 85 % | $894,661 | 84 % | | Equity securities | $84,253 | 7 % | $72,560 | 7 % | | Agent loans | $67,787 | 6 % | $69,476 | 7 % | | Other investments | $23,026 | 2 % | $30,511 | 2 % | | Total investments | $1,136,307 | 100 % | $1,067,208 | 100 % | - Net unrealized losses on fixed maturities, net of deferred taxes, decreased to **$24.7 million** at December 31, 2023, from **$52.5 million** at December 31, 2022[203](index=203&type=chunk) Fixed Maturity Portfolio by Industry Sector and Rating (December 31, 2023, in thousands) | Industry Sector | AAA | AA | A | BBB | Non-investment grade | Fair value | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Basic materials | $0 | $0 | $954 | $4,345 | $5,814 | $11,113 | | Communications | $0 | $2,905 | $13,845 | $11,474 | $15,466 | $43,690 | | Consumer | $0 | $1,989 | $21,874 | $66,538 | $37,449 | $127,850 | | Diversified | $0 | $0 | $0 | $0 | $204 | $204 | | Energy | $0 | $0 | $3,860 | $21,854 | $9,239 | $34,953 | | Financial | $0 | $2,066 | $98,091 | $123,301 | $13,799 | $237,257 | | Industrial | $0 | $0 | $7,856 | $19,281 | $26,907 | $54,044 | | Structured securities | $137,058 | $190,550 | $27,517 | $16,464 | $117 | $371,706 | | Technology | $1,909 | $0 | $2,971 | $21,464 | $13,686 | $40,030 | | Utilities | $0 | $0 | $1,730 | $33,641 | $5,023 | $40,394 | | Total | $138,967 | $197,510 | $178,698 | $318,362 | $127,704 | $961,241 | Equity Securities Fair Value by Sector (December 31, in thousands) | Sector | 2023 | 2022 | | :--- | :--- | :--- | | Financial services | $69,900 | $61,084 | | Utilities | $5,810 | $5,708 | | Energy | $3,901 | $3,576 | | Consumer | $3,915 | $1,854 | | Technology | $500 | $0 | | Industrial | $180 | $0 | | Communications | $47 | $338 | | Total | $84,253 | $72,560 | [Shareholders' Equity](index=33&type=section&id=Shareholders%27%20Equity) Shareholders' equity related to postretirement plans decreased in 2023 due to actuarial losses, partially offset by higher asset returns - Shareholders' equity related to postretirement plans decreased by **$33.8 million** (net of tax) in 2023, primarily due to a current period actuarial loss driven by a lower discount rate, partially offset by higher than expected return on plan assets[208](index=208&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity through management fee revenue, investment income, and a revolving credit line to fund operations and shareholder distributions - Liquidity is primarily met by management fee revenue and investment income, used to fund operating costs, share repurchases, dividends, and capital expenditures[211](index=211&type=chunk) - The company maintains sufficient liquidity through cash, diverse liquid marketable securities, and a **$100 million** bank revolving line of credit (expires October 2026)[210](index=210&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk) Condensed Cash Flow Information (Years ended December 31, in thousands) | Cash Flow Activity | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $381,205 | $366,152 | $402,794 | | Net cash used in investing activities | $(157,565) | $(106,922) | $(185,490) | | Net cash used in financing activities | $(221,675) | $(300,842) | $(194,842) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $1,965 | $(41,612) | $22,462 | - Operating cash increased in 2023 due to higher management fees, partially offset by increased agent commissions, pension contributions, and operating expenses[215](index=215&type=chunk) - Investing activities used **$157.6 million** in 2023, primarily for fixed asset purchases (software, home office renovations) and loans for real estate development[216](index=216&type=chunk) - Financing activities used **$221.7 million** in 2023, mainly for dividends paid to shareholders[217](index=217&type=chunk) - Future funding requirements can be met through unrestricted cash (**$128.7 million** at Dec 31, 2023), the **$100 million** revolving line of credit, and liquidation of unpledged investment assets (**$799.0 million** at Dec 31, 2023)[219](index=219&type=chunk) [Off-Balance Sheet Arrangements](index=35&type=section&id=Off-Balance%20Sheet%20Arrangements) The company has contingent obligations for guarantees but does not expect a material impact on its financial condition or cash flows - The company has contingent obligations for guarantees, but does not believe they will have a material current or future effect on its financial condition, results of operations, or cash flows[221](index=221&type=chunk) [Enterprise Risk Management](index=36&type=section&id=Enterprise%20Risk%20Management) The ERM function identifies, manages, and monitors significant risks to achieve strategic objectives, with Board oversight and scenario testing - The ERM function ensures significant risks are identified, understood, managed, and monitored to achieve strategic objectives, with oversight from the Board of Directors and executive management[222](index=222&type=chunk)[223](index=223&type=chunk) - The ERM process includes extreme event analyses and scenario testing to quantify potential variability and assess capital and liquidity sufficiency[223](index=223&type=chunk) [Transactions/Agreements with Related Parties](index=36&type=section&id=Transactions%2FAgreements%20with%20Related%20Parties) The Board oversees intercompany relationships with the Exchange, ensuring fair transactions within the regulated insurance holding company system - The Board of Directors oversees intercompany relationships with the Exchange, making decisions that benefit subscribers and the Exchange's overall health[224](index=224&type=chunk) - Indemnity and the Exchange, along with its subsidiaries, form an insurance holding company system, subject to state regulations requiring fair and reasonable intercompany transactions[225](index=225&type=chunk)[226](index=226&type=chunk) - Intercompany agreements include the subscriber's agreement (management fee for services) and service agreements for administrative services and shared facilities, with reimbursements settled at cost[227](index=227&type=chunk)[228](index=228&type=chunk) - Net receivables from the Exchange and affiliates were **$625.3 million** (**25.3%** of total assets) at December 31, 2023, representing a concentration of credit risk[230](index=230&type=chunk) - In December 2023, Indemnity issued two senior secured loans totaling **$13.6 million** to fund a real estate development project with related party investors[231](index=231&type=chunk)[385](index=385&type=chunk)[386](index=386&type=chunk) [ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Market risk primarily arises from the investment portfolio's exposure to interest rate, credit, concentration, liquidity, and equity price risks - Market risk arises from adverse changes in interest rates, credit spreads, equity prices, and foreign exchange rates, with the investment portfolio (**85%** fixed maturity) being the primary exposure[232](index=232&type=chunk)[233](index=233&type=chunk) - Interest rate risk is managed by monitoring effective duration; a **100-basis point** parallel increase in interest rates would decrease the fair value of the fixed maturity portfolio by an estimated **$25.8 million** in 2023[233](index=233&type=chunk)[234](index=234&type=chunk)[235](index=235&type=chunk) Fixed Maturities Interest-Rate Sensitivity Analysis (December 31, in thousands) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Fair value of fixed maturity portfolio | $961,241 | $894,661 | | Fair value assuming 100-basis point rise in interest rates | $935,444 | $868,919 | | Effective duration (as a percentage) | 2.7 | 2.9 | - Investment credit risk is managed through upfront underwriting analysis and ongoing credit quality reviews, with the majority of fixed maturities being investment grade[238](index=238&type=chunk)[239](index=239&type=chunk) Fixed Maturity Investments by Rating (December 31, in thousands) | Rating Category | Amortized cost (2023) | Fair value (2023) | Percent of total (2023) | Amortized cost (2022) | Fair value (2022) | Percent of total (2022) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | AAA, AA, A | $537,751 | $515,175 | 54 % | $518,088 | $479,413 | 54 % | | BBB | $324,538 | $318,362 | 33 % | $318,801 | $300,900 | 33 % | | Total investment grade | $862,289 | $833,537 | 87 % | $836,889 | $780,313 | 87 % | | BB | $51,564 | $50,170 | 5 % | $45,784 | $41,978 | 5 % | | B | $65,453 | $65,251 | 7 % | $66,574 | $62,530 | 7 % | | CCC, CC, C, and below | $13,247 | $12,283 | 1 % | $11,888 | $9,840 | 1 % | | Total non-investment grade | $130,264 | $127,704 | 13 % | $124,246 | $114,348 | 13 % | | Total | $992,553 | $961,241 | 100 % | $961,135 | $894,661 | 100 % | - Concentration risk is monitored against internal policies for individual issuers and industry sectors. Liquidity risk is managed by actively managing the maturity profile of the fixed maturity portfolio[242](index=242&type=chunk)[243](index=243&type=chunk) - Equity price risk, primarily from nonredeemable preferred stock, is not hedged[244](index=244&type=chunk) PART III [ITEM 8. Financial Statements and Supplementary Data](index=40&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section provides audited financial statements, including statements of operations, financial position, and cash flows, along with detailed notes and auditor's report - The financial statements, audited by Ernst & Young LLP, present fairly the financial position, results of operations, and cash flows in conformity with U.S. GAAP[247](index=247&type=chunk) Statements of Operations (Years ended December 31, in thousands) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Total operating revenue | $3,268,940 | $2,840,124 | $2,633,977 | | Total operating expenses | $2,748,684 | $2,463,910 | $2,315,880 | | Operating income | $520,256 | $376,214 | $318,097 | | Total investment income | $28,968 | $632 | $67,332 | | Income before income taxes | $561,936 | $376,452 | $376,404 | | Income tax expense | $115,875 | $77,883 | $78,544 | | Net income | $446,061 | $298,569 | $297,860 | | Net income per share - diluted (Class A) | $8.53 | $5.71 | $5.69 | Statements of Financial Position (December 31, in thousands) | Asset/Liability/Equity | 2023 | 2022 | | :--- | :--- | :--- | | Total assets | $2,471,964 | $2,239,456 | | Total liabilities | $809,129 | $791,048 | | Total shareholders' equity | $1,662,835 | $1,448,408 | Statements of Cash Flows (Years ended December 31, in thousands) | Cash Flow Activity | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $381,205 | $366,152 | $402,794 | | Net cash used in investing activities | $(157,565) | $(106,922) | $(185,490) | | Net cash used in financing activities | $(221,675) | $(300,842) | $(194,842) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $1,965 | $(41,612) | $22,462 | | Cash, cash equivalents, and restricted cash, end of year | $144,055 | $142,090 | $183,702 | - The company's primary function is to serve as attorney-in-fact for the Erie Insurance Exchange, providing policy issuance, renewal, and administrative services, for which it retains a management fee based on direct and affiliated assumed premiums[271](index=271&type=chunk)[272](index=272&type=chunk) - Management fee revenue for policy issuance and renewal services is recognized at the time of policy issuance or renewal, while revenue for administrative services is recognized over a four-year period[293](index=293&type=chunk)[294](index=294&type=chunk) - The company's investment portfolio consists primarily of fixed maturity securities (**85%** in 2023) and equity securities, with unrealized gains and losses on available-for-sale securities recognized in other comprehensive income[199](index=199&type=chunk)[283](index=283&type=chunk) - Fixed assets, primarily software and buildings, are depreciated using the straight-line method, with construction in progress for home office renovations expected to complete by 2027[288](index=288&type=chunk)[327](index=327&type=chunk)[328](index=328&type=chunk) - The company has access to a **$100 million** bank revolving line of credit, with **$99.1 million** available as of December 31, 2023, and is in compliance with all covenants[330](index=330&type=chunk) - Pension plans include a defined benefit plan and an unfunded SERP, with a **$95 million** contribution made in 2023, resulting in a net benefit asset of **$34.3 million**[331](index=331&type=chunk)[338](index=338&type=chunk) - Deferred compensation plans for executives and directors include annual and long-term incentive plans, with awards settled in cash or Class A common stock, often held in a rabbi trust[352](index=352&type=chunk)[353](index=353&type=chunk)[354](index=354&type=chunk)[355](index=355&type=chunk)[359](index=359&type=chunk)[360](index=360&type=chunk)[361](index=361&type=chunk)[362](index=362&type=chunk) - The company's effective tax rate is reconciled to the statutory federal income tax rate, and it had no valuation allowance for deferred tax assets at December 31, 2023 or 2022[369](index=369&type=chunk)[370](index=370&type=chunk) - Significant receivables from the Exchange and its affiliates (**$625.3 million** at Dec 31, 2023) represent a concentration of credit risk[387](index=387&type=chunk) - The company is involved in litigation in the ordinary course of business and establishes reserves when losses are probable and estimable, believing current accruals are appropriate[390](index=390&type=chunk)[391](index=391&type=chunk) [ITEM 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure](index=76&type=section&id=Item%209.%20Changes%20In%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported no changes in or disagreements with accountants regarding accounting or financial disclosure - There were no changes in or disagreements with accountants on accounting and financial disclosure[395](index=395&type=chunk) [ITEM 9A. Controls and Procedures](index=76&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with no material changes - Disclosure controls and procedures were evaluated and deemed effective as of December 31, 2023, by management, including the CEO and CFO[396](index=396&type=chunk)[397](index=397&type=chunk) - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[398](index=398&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2023, based on the 2013 COSO framework[399](index=399&type=chunk) - Ernst & Young LLP, the independent auditor, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting[400](index=400&type=chunk)[403](index=403&type=chunk)[404](index=404&type=chunk) [ITEM 9B. Other Information](index=76&type=section&id=Item%209B.%20Other%20Information) No additional information was filed in the fourth quarter of 2023 that had not already been reported in a Form 8-K - No additional information was filed in the fourth quarter of 2023 that had not already been reported in a Form 8-K[401](index=401&type=chunk) PART IV [ITEM 10. Directors, Executive Officers and Corporate Governance](index=78&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the Schedule 14C, with established codes of conduct - Information on directors, executive officers, corporate governance, audit committee, and Section 16(a) compliance is incorporated by reference to the Schedule 14C information statement[412](index=412&type=chunk) - The company has a Code of Conduct for all directors, officers, and employees, and a Code of Ethics for Senior Financial Officers[413](index=413&type=chunk) Executive Officers of the Registrant (Age as of 12/31/2023) | Name | Age | Principal Occupation and Positions for Past Five Years | | :--- | :--- | :--- | | Timothy G. NeCastro | 63 | President and Chief Executive Officer since August 2016. Director of EFL, EIC, Flagship, ENY and EPC. | | Brian W. Bolash | 58 | Executive Vice President, Secretary and General Counsel since January 2022. Senior Vice President, Secretary and General Counsel, October 2018-December 2021. Senior Counsel and Corporate Secretary, January 2016-September 2018. Director of EFL, EIC, Flagship, ENY and EPC. | | Sean D. Dugan | 55 | Executive Vice President, Human Resources and Corporate Services since January 2023. Senior Vice President, Human Resources, March 2020-December 2022. Corporate Human Resources Officer, October 2018-March 2020. Director of EFL, EIC, Flagship, ENY and EPC. | | Lorianne Feltz | 54 | Executive Vice President, Claims & Customer Service since November 2016. | | Julie M. Pelkowski | 54 | Executive Vice President and Chief Financial Officer since May 2023. Senior Vice President, Enterprise Office, March 2022-April 2023. Senior Vice President and Controller, August 2016-February 2022. Director of EFL, EIC, Flagship, ENY and EPC. | | Douglas E. Smith | 49 | Executive Vice President, Sales & Products since November 2016. | | Parthasarathy Srinivasa | 52 | Executive Vice President and Chief Information Officer since April 2022. Prior roles at Verisk Analytics and Safe Auto Insurance. | [ITEM 11. Executive Compensation](index=79&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation information is incorporated by reference from the Schedule 14C information statement - Executive compensation information is incorporated by reference to the Schedule 14C information statement[415](index=415&type=chunk) [ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=79&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership and equity compensation plan information is incorporated by reference from the Schedule 14C information statement - Information on security ownership and equity compensation plans is incorporated by reference to the Schedule 14C information statement[416](index=416&type=chunk) [ITEM 13. Certain Relationships and Related Transactions, and Director Independence](index=79&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) Information on certain relationships with outside directors is incorporated by reference from the Schedule 14C information statement - Information on certain relationships with outside directors is incorporated by reference to the Schedule 14C information statement[417](index=417&type=chunk) [ITEM 14. Principal Accountant Fees and Services](index=79&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information on principal accountant fees and services is incorporated by reference from the Schedule 14C information statement - Information on principal accountant fees and services is incorporated by reference to the Schedule 14C information statement[418](index=418&type=chunk) [ITEM 15. Exhibits and Financial Statement Schedules](index=80&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists exhibits and financial statement schedules, including the auditor's report, financial statements, and a detailed Exhibit Index - The section includes the Report of Independent Registered Public Accounting Firm, financial statements (Operations, Comprehensive Income, Financial Position, Shareholders' Equity, Cash Flows), and Notes to Financial Statements[424](index=424&type=chunk) - A detailed Exhibit Index lists corporate documents (Articles of Incorporation, Bylaws), agreements (Subscriber's Agreement, Services Agreements, Indemnification Agreements, Credit Agreements), and compensation plans (Annual Incentive Plan, Long-Term Incentive Plan, Equity Compensation Plan, Deferred Compensation Plans, Retirement Plans)[426](index=426&type=chunk)[427](index=427&type=chunk)[428](index=428&type=chunk) [ITEM 16. Form 10-K Summary](index=80&type=section&id=Item%2016.%20Form%2010-K%20Summary) No Form 10-K Summary is provided - No Form 10-K Summary is provided[423](index=423&type=chunk)

Exhibit 99.2 Erie Indemnity Company Statements of Operations (dollars in thousands, except per share data) | | | | Three months ended December | | | Twelve months ended | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | 31, | | | December 31, | | | | | | 2023 | (Unaudited) | 2022 | | 2023 | | 2022 | | Operating revenue | | | | | | | | | | Management fee revenue - policy issuance and renewal | | | | | | | | | | services | $ | 601,595 | $ | 503,633 | $ | 2,442,073 | $ | 2,087,846 | | Manage ...

ERIE, Pa., Feb. 8, 2024 /PRNewswire/ -- Erie Indemnity Company (NASDAQ: ERIE) will host a pre-recorded audio webcast with the financial community providing financial results for the fourth quarter and year-end on Tuesday, February 27th, at 10 a.m. Eastern Time. Erie Indemnity will issue a press release reporting its results after the close of the market on Monday, February 26th. The pre-recorded audio will be available on the company's Investor Relations website at www.erieinsurance.com/about/investors.aspx ...

Erie Indemnity Co (NASDAQ:ERIE) Q3 2023 Earnings Conference Call October 27, 2023 10:00 AM ET Company Participants Timothy NeCastro - President & CEO Julie Pelkowski - EVP & CFO Scott Beilharz - VP, Capital Management & IR Conference Call Participants Operator Good morning, and welcome to the Erie Indemnity Company's Third Quarter 2023 Earnings Conference Call. This call was prerecorded, and there will be no question-and-answer session row I'd like to introduce your host for the call, Vice President of Inve ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides unaudited financial statements, management's analysis of operations and financial condition, market risk disclosures, and internal controls [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) The unaudited financial statements for the period ended September 30, 2023, show significant growth in revenue and net income compared to the prior year, with total assets increasing to **$2.39 billion** and shareholders' equity rising to **$1.61 billion** [Statements of Operations](index=4&type=section&id=Statements%20of%20Operations) For Q3 2023, Erie Indemnity reported a **55.4% increase in net income** to **$131.0 million**, driven by a **15.9% rise in total operating revenue** and a **39.4% increase in operating income** Statements of Operations Highlights (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | **Total operating revenue** | $858,938 | $741,236 | $2,451,273 | $2,139,489 | | **Operating income** | $148,471 | $106,472 | $393,172 | $294,784 | | **Net income** | $131,040 | $84,313 | $335,133 | $233,079 | | **Class A common stock – diluted EPS** | $2.51 | $1.61 | $6.41 | $4.46 | [Statements of Comprehensive Income](index=6&type=section&id=Statements%20of%20Comprehensive%20Income) Comprehensive income for Q3 2023 increased to **$122.4 million**, including **$131.0 million in net income** partially offset by an **$8.6 million other comprehensive loss** from unrealized securities losses Comprehensive Income (in thousands) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | **Net income** | $131,040 | $84,313 | $335,133 | $233,079 | | **Total other comprehensive loss, net of tax** | $(8,644) | $(15,447) | $(5,380) | $(63,884) | | **Comprehensive income** | $122,396 | $68,866 | $329,753 | $169,195 | [Statements of Financial Position](index=7&type=section&id=Statements%20of%20Financial%20Position) As of September 30, 2023, total assets reached **$2.39 billion**, driven by higher receivables, while total liabilities slightly decreased and shareholders' equity increased to **$1.61 billion** due to retained earnings growth Financial Position Highlights (in thousands) | Metric | Sep 30, 2023 (Unaudited) | Dec 31, 2022 | | :--- | :--- | :--- | | **Total assets** | $2,394,549 | $2,239,456 | | **Total liabilities** | $782,660 | $791,048 | | **Total shareholders' equity** | $1,611,889 | $1,448,408 | [Statements of Shareholders' Equity](index=8&type=section&id=Statements%20of%20Shareholders%27%20Equity) Shareholders' equity increased to **$1.61 billion** by September 30, 2023, primarily due to **$335.1 million in net income**, partially offset by **$166.3 million in dividends** and a **$5.4 million other comprehensive loss** - Total shareholders' equity grew to **$1,611.9 million** by September 30, 2023, starting from **$1,448.4 million** at December 31, 2022[16](index=16&type=chunk) - Key changes in shareholders' equity for the nine months ended September 30, 2023 include net income of **$335.1 million**, offset by dividends of **$166.3 million** and an other comprehensive loss of **$5.4 million**[16](index=16&type=chunk) [Statements of Cash Flows](index=10&type=section&id=Statements%20of%20Cash%20Flows) Net cash provided by operating activities was **$232.8 million** for the nine months ended September 30, 2023, while cash used in investing activities increased and financing activities decreased significantly due to prior-year debt repayment Cash Flow Summary (in thousands) | Activity | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $232,769 | $238,108 | | **Net cash used in investing activities** | $(105,730) | $(74,997) | | **Net cash used in financing activities** | $(166,256) | $(249,149) | | **Net decrease in cash and cash equivalents** | $(39,217) | $(86,038) | [Notes to Financial Statements](index=11&type=section&id=Notes%20to%20Financial%20Statements) The notes detail the company's role as attorney-in-fact for Erie Insurance Exchange, its revenue recognition from management fees, and accounting for investments at fair value, including a **$95 million pension contribution** and **$620.7 million in credit risk concentration** - Erie Indemnity's primary function is to act as the attorney-in-fact for the policyholders of the Erie Insurance Exchange, performing policy issuance, renewal, and administrative services[26](index=26&type=chunk)[27](index=27&type=chunk) - Revenue is derived from a management fee, capped at **25% of the Exchange's written premiums**, which is allocated between two performance obligations: policy issuance/renewal and administrative services[35](index=35&type=chunk) - The company made a **$95 million contribution** to its defined benefit pension plan during the third quarter of 2023[72](index=72&type=chunk) - A significant concentration of credit risk exists, with net receivables from the Exchange and its affiliates totaling **$620.7 million** at September 30, 2023[80](index=80&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes strong performance to higher management fee revenue, driven by a **16.2% year-to-date increase** in premiums written by the Erie Insurance Exchange, leading to increased operating income and a solid financial condition [Operating Overview](index=30&type=section&id=Operating%20Overview) The company's earnings are primarily driven by management fee revenue from the Erie Insurance Exchange, with operating income increasing **33.4% to $393.2 million** and net income rising **43.8% to $335.1 million** for the nine months ended September 30, 2023 - The company's results are directly tied to the growth and financial condition of the Exchange, as management fees are based on the Exchange's written premiums[95](index=95&type=chunk) Financial Overview (in thousands) | Metric | YTD 2023 | YTD 2022 | % Change | | :--- | :--- | :--- | :--- | | **Operating income** | $393,172 | $294,784 | 33.4% | | **Net income** | $335,133 | $233,079 | 43.8% | - The direct and affiliated assumed premiums written by the Exchange increased **16.2% to $7.6 billion** for the nine months ended September 30, 2023[96](index=96&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Management fee revenue for policy issuance and renewal services increased **17.7% in Q3 2023**, driven by **17.6% growth** in the Exchange's written premiums, while total investment income turned positive due to lower losses and higher yields - The management fee rate was set at the maximum of **25%** for both 2023 and 2022[103](index=103&type=chunk) - Direct and affiliated assumed premiums written by the Exchange increased **17.6% in Q3 2023**, driven by growth in personal lines and commercial multi-peril premiums[107](index=107&type=chunk) - Total commissions expense increased **14.4% in Q3 2023**, driven by premium growth but partially offset by a decrease in agent incentive compensation due to higher claims severity experienced by the Exchange[118](index=118&type=chunk) - Net investment income increased in Q3 2023 primarily due to a decrease in limited partnership losses and higher bond income from increased yields[126](index=126&type=chunk) [Financial Condition](index=39&type=section&id=Financial%20Condition) The company's financial condition is stable, with a **$1.08 billion investment portfolio** primarily composed of high-quality fixed maturities, and its sole customer, the Erie Insurance Exchange, maintains a strong financial position with an **A+ "Superior" rating** and **$9.1 billion in policyholders' surplus** Investment Portfolio Composition (in thousands) | Investment Type | Sep 30, 2023 | % to total | | :--- | :--- | :--- | | Fixed maturities | $915,237 | 85% | | Equity securities | $79,516 | 7% | | Agent loans | $68,192 | 6% | | Other investments | $17,196 | 2% | | **Total investments** | **$1,080,141** | **100%** | - The Erie Insurance Exchange maintains an **A+ "Superior" financial strength rating** from A.M. Best, which was affirmed with a stable outlook on August 10, 2023[130](index=130&type=chunk) - The Exchange's policyholders' surplus was **$9.1 billion** at September 30, 2023[131](index=131&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position, primarily funded by management fee revenue and investment income, generating **$232.8 million in cash from operations** for the first nine months of 2023, and has access to a **$100 million revolving line of credit** - Primary sources of liquidity are funds from management fee revenue and investment income, used to fund commissions, salaries, dividends, and capital expenditures[142](index=142&type=chunk) - A pension contribution of **$95.0 million** was made in 2023, compared to **$25.0 million** in 2022[144](index=144&type=chunk) - The company has access to a **$100 million bank revolving line of credit** expiring in October 2026, with no borrowings outstanding as of September 30, 2023[149](index=149&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk exposures relate to fluctuations in interest rates and security prices, with no material changes during the first nine months of 2023, though potential volatility from inflation and rising interest rates is monitored - There have been no material changes that impacted the investment portfolio or reshaped asset allocation reviews during the nine months ended September 30, 2023[153](index=153&type=chunk) - The company continues to monitor risks from the economic environment, including inflation and rising interest rates, and will take measures to minimize potential risk exposure[153](index=153&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures are effective as of the end of the period covered by the report[154](index=154&type=chunk) - No material changes to internal control over financial reporting occurred during the nine months ended September 30, 2023[155](index=155&type=chunk) [PART II. OTHER INFORMATION](index=43&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity security sales, and a list of exhibits filed with the report [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company is a defendant in a lawsuit alleging breach of fiduciary duty related to management fees, with the case remanded to the Court of Common Pleas of Allegheny County, Pennsylvania, and the company intends to vigorously defend against all allegations - A complaint alleges breach of fiduciary duty by Indemnity in setting the management fee it receives from the Erie Insurance Exchange[158](index=158&type=chunk)[162](index=162&type=chunk) - The case has been remanded to the Court of Common Pleas of Allegheny County, Pennsylvania, after appeals regarding federal jurisdiction were denied[165](index=165&type=chunk)[166](index=166&type=chunk) - Indemnity intends to vigorously defend against all allegations and requests for relief in the complaint[167](index=167&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 - No material changes from the risk factors disclosed in the 2022 Form 10-K have been reported[170](index=170&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company has an ongoing stock repurchase program, repurchasing **1,445 shares** of Class A common stock at an average price of **$220.79 per share** during Q3 2023, with approximately **$17.8 million** of repurchase authority remaining Issuer Purchases of Equity Securities (Q3 2023) | Period | Total number of shares purchased | Average price paid per share | | :--- | :--- | :--- | | July 1-31, 2023 | — | $ — | | August 1-31, 2023 | 1,445 | $220.79 | | September 1-30, 2023 | — | $ — | - Approximately **$17.8 million** of repurchase authority remained under the stock repurchase program as of September 30, 2023[172](index=172&type=chunk) [Item 6. Exhibits](index=45&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including a supplemental retirement plan document, certifications by the CEO and CFO, and Inline XBRL data files - Exhibits filed include management compensatory plan documents, CEO/CFO certifications (Sections 302 and 906), and XBRL data files[174](index=174&type=chunk)

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Erie Indemnity Company's unaudited financial statements, showing increased net income and asset growth for the periods ended June 30, 2023 [Statements of Operations](index=4&type=section&id=Statements%20of%20Operations) Erie Indemnity reported **$839.9 million** in Q2 2023 operating revenue and **$117.9 million** net income, a **47% increase** driven by higher management fee revenue Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | **Total operating revenue** | $839,870 | $726,143 | $1,592,335 | $1,398,253 | | **Operating income** | $134,158 | $104,000 | $244,701 | $188,312 | | **Net income** | $117,852 | $80,147 | $204,093 | $148,766 | | **Diluted EPS (Class A)** | $2.25 | $1.53 | $3.90 | $2.84 | [Statements of Comprehensive Income](index=6&type=section&id=Statements%20of%20Comprehensive%20Income) Comprehensive income significantly increased to **$113.4 million** in Q2 2023, driven by higher net income and reduced other comprehensive losses Comprehensive Income (in thousands) | Metric | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | **Net Income** | $117,852 | $80,147 | $204,093 | $148,766 | | **Other comprehensive (loss) income, net of tax** | $(4,488) | $(23,248) | $3,264 | $(48,437) | | **Comprehensive Income** | $113,364 | $56,899 | $207,357 | $100,329 | [Statements of Financial Position](index=7&type=section&id=Statements%20of%20Financial%20Position) Total assets increased to **$2.33 billion** as of June 30, 2023, with shareholders' equity rising to **$1.54 billion** Financial Position Highlights (in thousands) | Metric | June 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | $2,325,511 | $2,239,456 | | **Total Liabilities** | $780,599 | $791,048 | | **Total Shareholders' Equity** | $1,544,912 | $1,448,408 | [Statements of Cash Flows](index=9&type=section&id=Statements%20of%20Cash%20Flows) Net cash from operating activities significantly increased to **$180.0 million** in H1 2023, leading to a slight overall increase in cash and cash equivalents Cash Flow Summary - Six Months Ended June 30 (in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $180,007 | $106,274 | | **Net cash used in investing activities** | $(68,264) | $(42,196) | | **Net cash used in financing activities** | $(110,837) | $(157,456) | | **Net increase (decrease) in cash** | $906 | $(93,378) | [Notes to Financial Statements](index=10&type=section&id=Notes%20to%20Financial%20Statements) The notes detail the company's operations as attorney-in-fact for Erie Insurance Exchange, outlining revenue streams, accounting policies, and significant credit risk concentration - The company's primary function is serving as the attorney-in-fact for the subscribers at the Erie Insurance Exchange, performing policy issuance, renewal, and administrative services. Its revenue is directly tied to the premiums written by the Exchange[24](index=24&type=chunk)[25](index=25&type=chunk) - Management fee revenue is calculated as a percentage (not to exceed **25%**) of the direct and affiliated assumed written premiums of the Exchange. This fee is allocated between two performance obligations: policy issuance/renewal and administrative services[33](index=33&type=chunk) - The company has a significant concentration of credit risk, as the majority of its revenue and receivables are from the Erie Insurance Exchange and its affiliates. Net receivables from the Exchange were **$591.0 million** as of June 30, 2023[28](index=28&type=chunk)[77](index=77&type=chunk) - The company expects to contribute an estimated **$95 million** to its pension plans during the third quarter of 2023[69](index=69&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes strong H1 2023 performance to robust management fee revenue growth, driven by a **15.5%** increase in Erie Insurance Exchange premiums, alongside improved investment performance and strong liquidity [Operating Overview](index=27&type=section&id=Operating%20Overview) The company's operating income significantly increased in Q2 2023 and H1 2023, driven by a **15.5%** rise in Erie Insurance Exchange's written premiums - The company's results are directly tied to the growth and financial condition of the Erie Insurance Exchange, as management fees are based on the Exchange's direct and affiliated assumed written premiums[92](index=92&type=chunk) Financial Overview (in thousands) | Metric | Q2 2023 | Q2 2022 | % Change | YTD 2023 | YTD 2022 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Operating income** | $134,158 | $104,000 | 29.0% | $244,701 | $188,312 | 29.9% | | **Net income** | $117,852 | $80,147 | 47.0% | $204,093 | $148,766 | 37.2% | - Direct and affiliated assumed premiums written by the Exchange increased **16.3%** in Q2 2023 and **15.5%** in the first six months of 2023, driving management fee revenue growth[93](index=93&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Management fee revenue grew **15.4%** in H1 2023 due to a **15.5%** increase in Exchange premiums, while investment income significantly improved to **$11.6 million** in Q2 2023 Direct and Affiliated Assumed Premiums Written by the Exchange (in thousands) | Period | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | **Three months ended June 30** | $2,613,131 | $2,247,766 | 16.3% | | **Six months ended June 30** | $4,916,999 | $4,257,963 | 15.5% | - The increase in the Exchange's premiums was driven by a **5.2%** increase in policies in force and a **7.6%** increase in average premium per policy year-over-year as of June 30, 2023[104](index=104&type=chunk) - Total commission costs increased by **$71.3 million** (**12.1%**) for the first six months of 2023, primarily due to premium growth, partially offset by lower agent incentive compensation[115](index=115&type=chunk) Total Investment Income (Loss) (in thousands) | Period | 2023 | 2022 | | :--- | :--- | :--- | | **Three months ended June 30** | $11,627 | $(2,094) | | **Six months ended June 30** | $6,895 | $915 | [Financial Condition](index=37&type=section&id=Financial%20Condition) The investment portfolio grew to **$1.09 billion** as of June 30, 2023, primarily in high-quality fixed maturities, while the Erie Insurance Exchange maintains an A+ 'Superior' rating Investment Portfolio Composition (in thousands) | Investment Type | June 30, 2023 | % to total | Dec 31, 2022 | % to total | | :--- | :--- | :--- | :--- | :--- | | **Fixed maturities** | $920,952 | 85% | $894,661 | 84% | | **Equity securities** | $77,220 | 7% | $72,560 | 7% | | **Agent loans** | $68,903 | 6% | $69,476 | 7% | | **Other investments** | $18,528 | 2% | $30,511 | 2% | | **Total investments** | $1,085,603 | 100% | $1,067,208 | 100% | - The Erie Insurance Exchange and its property and casualty subsidiaries are rated A+ 'Superior' by A.M. Best, with a stable outlook as of August 9, 2022[127](index=127&type=chunk) - The Exchange's policyholders' surplus was **$9.7 billion** at June 30, 2023, down from **$10.1 billion** at December 31, 2022[128](index=128&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity, with net cash from operations increasing to **$180.0 million** in H1 2023 and **$99.1 million** available on its revolving credit line - Primary sources of liquidity are funds from management fee revenue and investment income, used to fund operations, commissions, dividends, and capital expenditures[139](index=139&type=chunk) - Net cash provided by operating activities increased to **$180.0 million** in H1 2023 from **$106.3 million** in H1 2022, mainly due to higher management fees received[141](index=141&type=chunk) - The company has access to a **$100 million** bank revolving line of credit expiring in October 2026, with **$99.1 million** available as of June 30, 2023[146](index=146&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes to its market risk profile or investment strategies during H1 2023, despite inflationary pressures and rising interest rates - There have been no material changes that impacted the company's portfolio or reshaped its periodic investment reviews of asset allocations during the six months ended June 30, 2023[149](index=149&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures are effective as of June 30, 2023[150](index=150&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[151](index=151&type=chunk) [PART II. OTHER INFORMATION](index=41&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) The company is vigorously defending an ongoing lawsuit alleging breach of fiduciary duty regarding the management fee received from the Erie Insurance Exchange - The company is a defendant in a lawsuit alleging breach of fiduciary duty regarding the management fee it receives from the Erie Insurance Exchange[153](index=153&type=chunk)[154](index=154&type=chunk) - The plaintiffs seek damages, disgorgement of profits, and other relief, with the case remanded to the Court of Common Pleas of Allegheny County, Pennsylvania[155](index=155&type=chunk)[161](index=161&type=chunk) - Erie Indemnity intends to vigorously defend against all allegations and requests for relief in the complaint[163](index=163&type=chunk) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors have occurred since the 2022 Annual Report on Form 10-K - There have been no material changes from the risk factors previously disclosed in the company's 2022 Form 10-K[166](index=166&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **1,905** Class A common shares at **$225.87** per share in Q2 2023, with **$17.8 million** remaining under the repurchase program Issuer Purchases of Equity Securities (Q2 2023) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | **April 1-30, 2023** | — | $ — | | **May 1-31, 2023** | 1,905 | $225.87 | | **June 1-30, 2023** | — | $ — | | **Total** | 1,905 | $225.87 | - The repurchased shares were used to fund the rabbi trust for the outside director deferred stock compensation plan and the incentive compensation deferral plan[168](index=168&type=chunk) - Approximately **$17.8 million** of repurchase authority remained under the current stock repurchase program as of June 30, 2023[167](index=167&type=chunk)[168](index=168&type=chunk) [Item 6. Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including various agreements, employee benefit plans, and CEO/CFO certifications - Exhibits filed include employee savings and retirement plans, CEO/CFO certifications under Sarbanes-Oxley Sections 302 and 906, and Inline XBRL data files[170](index=170&type=chunk)

Erie Indemnity Company (NASDAQ:ERIE) Q1 2023 Results Conference Call April 28, 2023 10:00 AM ET Company Participants Scott Beilharz - VP of Capital Management & IR Timothy NeCastro - President & CEO Gregory Gutting - Executive VP & CFO Operator Good morning, and welcome to the Erie Indemnity Company First Quarter 2023 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 of the call today, Vice Pre ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from___to___ Commission file number 0-24000 ERIE INDEMNITY COMPANY (Exact name of registrant as specified in its charter) | Class A common stock, stated val ...