ERIE INDEMNITY CO - Annual Report: 2023 (Form 10-K)

Transactions/Agreements with Related Parties

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:

Statements contained herein that are not historical fact are forward-looking statements and, as such, are subject to risks and uncertainties that could cause actual events and results to differ, perhaps materially, from those discussed herein. Forward-looking statements relate to future trends, events or results and include, without limitation, statements and assumptions on which such statements are based that are related to our plans, strategies, objectives, expectations, intentions, and adequacy of resources. Examples of forward-looking statements are discussions relating to premium and investment income, expenses, operating results, and compliance with contractual and regulatory requirements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Among the risks and uncertainties, in addition to those set forth in our filings with the Securities and Exchange Commission, that could cause actual results and future events to differ from those set forth or contemplated in the forward-looking statements include the following:

•dependence upon our relationship with the Erie Insurance Exchange ("Exchange") and the management fee under the agreement with the subscribers at the Exchange;

•dependence upon our relationship with the Exchange and the growth of the Exchange, including:

◦general business and economic conditions;

◦factors affecting insurance industry competition, including technological innovations;

◦dependence upon the independent agency system; and

◦ability to maintain our brand, including our reputation for customer service;

•dependence upon our relationship with the Exchange and the financial condition of the Exchange, including:

◦the Exchange's ability to maintain acceptable financial strength ratings;

◦factors affecting the quality and liquidity of the Exchange's investment portfolio;

◦changes in government regulation of the insurance industry;

◦litigation and regulatory actions;

◦emergence of significant unexpected events, including pandemics and economic or social inflation;

◦emerging claims and coverage issues in the industry; and

◦severe weather conditions or other catastrophic losses, including terrorism;

•costs of providing policy issuance and renewal services to the subscribers at the Exchange under the subscriber's agreement;

•ability to attract and retain talented management and employees;

•ability to ensure system availability and effectively manage technology initiatives;

•difficulties with technology or data security breaches, including cyber attacks;

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•ability to maintain uninterrupted business operations;

•compliance with complex and evolving laws and regulations and outcome of pending and potential litigation;

•factors affecting the quality and liquidity of our investment portfolio; and

•ability to meet liquidity needs and access capital.

A forward-looking statement speaks only as of the date on which it is made and reflects our analysis only as of that date. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changes in assumptions, or otherwise.

RECENT ACCOUNTING STANDARDS

See Item 8. "Financial Statements and Supplementary Data - Note 2, Significant Accounting Policies, of Notes to Financial Statements" contained within this report for a discussion of recently issued accounting standards and the impact on our financial statements if known.

OPERATING OVERVIEW

Overview

We are a Pennsylvania business corporation that since 1925 has been the managing attorney-in-fact for the subscribers (policyholders) at the Exchange, a reciprocal insurer that writes property and casualty insurance. Our primary function as attorney-in-fact is to perform policy issuance and renewal services on behalf of the subscribers at the Exchange. We also act as attorney-in-fact on behalf of the subscribers at the Exchange, as well as the service provider for the Exchange's insurance subsidiaries, with respect to all administrative services.

The Exchange is a reciprocal insurance exchange, which is an unincorporated association of individuals, partnerships and corporations that agree to insure one another. Each applicant for insurance (a subscriber) to the Exchange signs a subscriber's agreement, which contains an appointment of Indemnity as their attorney-in-fact to transact the business of the Exchange on their behalf.

In accordance with the subscriber’s agreement for acting as attorney-in-fact in these two capacities, we retain a management fee. Management fee revenue is based upon all direct and affiliated assumed premiums written by the Exchange and the management fee rate, which is not to exceed 25%. Our Board of Directors establishes the management fee rate at least annually, generally in December for the following year. The process of setting the management fee rate includes, but is not limited to, the evaluation of current year operating results compared to both prior year and industry estimated results for both Indemnity and the Exchange, and consideration of several factors for both entities including, but not limited to: their relative financial strength and capital position; projected revenue, expense and earnings for the subsequent year; future capital needs; as well as competitive position. The management fee rate was set at 25% for 2023, 2022 and 2021. Based on analysis of the foregoing factors, our Board of Directors set the 2024 management fee rate again at 25%.

Our earnings are primarily driven by the management fee revenue generated for the services we provide on behalf of the subscribers at the Exchange. The policy issuance and renewal services we provide are related to the sales, underwriting and issuance of policies. The sales related services we provide include agent compensation and certain sales and advertising support services. Agent compensation includes scheduled commissions to agents based upon premiums written as well as incentive compensation, which is earned by achieving targeted measures. Agent compensation comprised approximately 67% of our 2023 policy issuance and renewal expenses. The underwriting services we provide include underwriting and policy processing and comprised approximately 9% of our 2023 policy issuance and renewal expenses. The remaining services we provide include customer service and administrative support. We also provide information technology services that support all the functions listed above that comprised approximately 11% of our 2023 policy issuance and renewal expenses. Included in these expenses are allocations of costs for departments that support these policy issuance and renewal functions.

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investment trading activity, accounting and all other functions attributable to the investment of funds. In 2023, approximately 71% of the administrative services expenses were entirely attributable to the respective administrative functions (claims handling, life insurance management and investment management), while the remaining 29% of these expenses were allocations of costs for departments that support these administrative functions. The expenses we incur and related reimbursements we receive for administrative services are presented gross in our Statements of Operations. The subscriber's agreement and service agreements provide for reimbursement of amounts incurred for these services to Indemnity. Reimbursements are settled at cost on a monthly basis. State insurance regulations require that intercompany service agreements and any material amendments be approved in advance by the state insurance department.

Our results of operations are tied to the growth and financial condition of the Exchange as the Exchange is our sole customer, and our earnings are largely generated from management fees based on the direct and affiliated assumed premiums written by the Exchange. The Exchange generates revenue by insuring preferred and standard risks, with personal lines comprising 70% of the 2023 direct and affiliated assumed written premiums and commercial lines comprising the remaining 30%. The principal personal lines products are private passenger automobile and homeowners. The principal commercial lines products are commercial multi-peril, commercial automobile and workers compensation.

We generate investment income from our fixed maturity and equity security portfolios. Our portfolio is managed with the objective of maximizing after-tax returns on a risk-adjusted basis. We actively evaluate the fixed maturity portfolios for securities in an unrealized loss position and record impairment write-downs on investments in instances where we have the intent to sell or it's more likely than not that we would be required to sell the security. Impairments resulting from a credit loss are recognized in earnings with a corresponding allowance on the Statement of Financial Position.

Financial Overview


	Years ended December 31,
(dollars in thousands, except per share data)	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

NM = not meaningful

Operating income increased in 2023 compared to 2022 as growth in operating revenue outpaced the growth in operating expenses. Management fee revenue is based upon the management fee rate we charge and the direct and affiliated assumed premiums written by the Exchange. The management fee rate was 25% for 2023, 2022, and 2021. The 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.

Cost of operations for policy issuance and renewal services increased 12.0% to $2.0 billion in 2023 primarily due to higher scheduled commissions driven by direct and affiliated assumed written premium growth, as well as increased employee compensation and technology costs. Cost of operations for policy issuance and renewal services increased 7.0% to $1.8 billion in 2022 primarily due to higher scheduled commissions driven by direct and affiliated assumed written premium growth, as well as increased professional fees and technology costs. Increases in the cost of operations for policy issuance and renewal services in both periods were partially offset by decreased agent incentive compensation driven by higher claims severity and related loss costs experienced by the Exchange.

Management fee revenue for administrative services increased 9.2% to $63.7 million in 2023 compared to an increase of 0.1% in 2022. The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $737.1 million in 2023 and $668.3 million in 2022, but had no net impact on operating income.

Total investment income increased $28.3 million in 2023 primarily due to lower net realized and unrealized investment losses and an increase in net investment income compared to 2022. Total investment income decreased $66.7 million in 2022

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primarily due to a decrease in net investment income as well as net realized and unrealized investment losses in 2022 compared to net gains in 2021.

General Conditions and Trends Affecting Our Business

Economic conditions

Unfavorable changes in economic conditions, including declining consumer confidence, inflation, high unemployment, and the threat of recession, among others, may lead the Exchange’s customers to modify coverage, not renew policies, or even cancel policies, which could adversely affect the premium revenue of the Exchange, and consequently our management fee revenue. Inflation remained elevated from historical levels during 2023. Continued elevated inflation or supply chain disruptions could impact the Exchange's operations and our management fees. In particular, unanticipated increased inflation costs including medical cost inflation, building material cost inflation, auto repair and replacement cost inflation, and social inflation may impact adequacy of estimated loss reserves and future premium rates of the Exchange. The extent and duration of the impacts to economic conditions remain uncertain. If any of these items impacted the financial condition or operations of the Exchange, it could have an impact on our financial results. See Financial Condition, Liquidity and Capital Resources, and Part I, Item 1A. "Risk Factors" contained within this report for a discussion of potential impacts to our operations or those of the Exchange.

Financial market volatility

Our portfolio of fixed maturity and equity security investments is subject to market volatility especially in periods of instability in the worldwide financial markets. Over time, net investment income could also be impacted by volatility and by the general level of interest rates, which impact reinvested cash flow from the portfolio and business operations. Depending upon market conditions, considerable fluctuation could occur in the fair value of our investment portfolio and reported total investment income, which could have an adverse impact on our financial condition, results of operations, and cash flows. Various ongoing geopolitical events, the uncertain inflationary and interest rate environments, and a potential economic slowdown could have a significant impact on the global financial markets with the potential for future losses and/or impairments on our investment portfolio.

CRITICAL ACCOUNTING ESTIMATES

The financial statements include amounts based upon estimates and assumptions that have a significant effect on reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period and related disclosures. We consider an accounting estimate to be critical if 1) it requires assumptions to be made that were uncertain at the time the estimate was made, and 2) different estimates that could have been used, or changes in the estimate that are likely to occur from period-to-period, could have a material impact on our Statements of Operations or Financial Position.

The following presents a discussion of those accounting policies surrounding estimates that we believe are the most critical to our reported amounts and require the most subjective and complex judgment. If actual events differ significantly from the underlying assumptions, there could be material adjustments to prior estimates that could potentially adversely affect our results of operations, financial condition, and cash flows. The estimates and the estimating methods used are reviewed continually, and any adjustments considered necessary are reflected in current earnings.

Investment Valuation

Fair Value Measurements

We make estimates concerning the fair value of our investments using valuation techniques to derive the fair value of the fixed maturity and equity investments we hold. Fair value is the price that would be received to sell an asset in an orderly transaction between willing market participants at the measurement date.

Fair value measurements are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market assumptions in the absence of observable market information. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Our investments are categorized into a three-level fair value hierarchy which assigns a Level 1 for highly observable inputs and a Level 3 to unobservable inputs. We continually assess whether or not an active market exists for all of our investments and as of each reporting date we re-evaluate their classification in the fair value hierarchy.

As of each reporting period, financial instruments recorded at fair value are classified based upon the lowest level of input that is significant to the fair value measurement. The presence of at least one unobservable input that has significant impact to the fair value measurement would result in classification as a Level 3 instrument. Our assessment of the significance of a particular input to the fair value measurement requires judgment, and considers factors specific to the asset, such as the relative impact on

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the fair value as a result of including a particular input and market conditions. While estimates of the fair values of our investment portfolio are obtained from outside pricing services, we ultimately determine whether the inputs used are observable or unobservable.

As of December 31, 2023, substantially all of the securities measured at fair value in our investment portfolio are classified as Level 2. Level 2 securities are valued using industry-standard models that consider various inputs, such as the interest rate and credit spread for the underlying financial instruments. All significant inputs are observable, or derived from observable information in the marketplace, or are supported by observable levels at which transactions are executed in the marketplace. At December 31, 2023, our investments classified as Level 3 were not significant.

See Item 8. "Financial Statements and Supplementary Data - Note 5, Fair Value, of Notes to Financial Statements" contained within this report for additional details on the fair value measurement of our investments.

Impairments

Our fixed maturity portfolio experienced unrealized losses in 2023 and 2022 as a result of the higher interest rate environment compared to prior years. We regularly monitor our fixed maturity and equity security portfolios for price changes and perform detailed reviews of securities in an unrealized loss position that may indicate that credit-related or other impairments exist. As of December 31, 2023, our intent to sell and credit-related impairments were not material to our financial condition or results of operations.

See Item 8. "Financial Statements and Supplementary Data - Note 2, Significant Accounting Policies, of Notes to Financial Statements" contained within this report for additional details on impairments.

Retirement Benefit Plans for Employees

Our pension plans consist of a noncontributory defined benefit pension plan covering substantially all employees and an unfunded supplemental employee retirement plan ("SERP") for certain members of executive and senior management. Although we are the sponsor of these postretirement plans and record the funded status of these plans, there are reimbursements between us and the Exchange and its subsidiaries for their allocated share of pension income or cost. See Item 8. "Financial Statements and Supplementary Data - Note 9, Postretirement Benefits, of Notes to Financial Statements" contained within this report for additional details on these reimbursements.

Our pension obligation is developed from actuarial estimates. Several statistical and other factors, which attempt to anticipate future events, are used in calculating the expense and liability related to the plans. Key factors include assumptions about the discount rates and expected rates of return on plan assets. We review these assumptions annually and modify them considering historical experience, current market conditions, including changes in investment returns and interest rates, and expected future trends.

Accumulated and projected benefit obligations are expressed as the present value of future cash payments. We discount those cash payments based upon a yield curve developed from corporate bond yield information with maturities that correspond to the payment of benefits. Lower discount rates increase present values and subsequent year pension expense, while higher discount rates decrease present values and subsequent year pension expense. The construction of the yield curve is based upon yields of corporate bonds rated AA or equivalent quality. Target yields are developed from bonds at various maturity points and a curve is fitted to those targets. Spot rates (zero coupon bond yields) are developed from the yield curve and used to discount benefit payment amounts associated with each future year. The present value of plan benefits is calculated by applying the spot/discount rates to projected benefit cash flows. A single discount rate is then developed to produce the same present value. The cash flows from the yield curve were matched against our projected benefit payments in the pension plan, which have a duration of about 15 years. This yield curve supported the selection of a 5.34% discount rate for the projected benefit obligation at December 31, 2023 and for the 2024 pension income. The same methodology was used to develop the 5.67% and 3.16% discount rates used to determine the projected benefit obligation for 2022 and 2021, respectively, and the pension income for 2023 and expense for 2022, respectively. A 25 basis point decrease in the discount rate assumption, with other assumptions held constant, would increase pension cost in the following year by $4.1 million, of which our share would be approximately $1.6 million, and would increase the pension benefit obligation by $37.2 million.

Unrecognized actuarial gains and losses arise from several factors, including experience and assumption changes in the obligations and from the difference between expected returns and actual returns on plan assets. These unrecognized gains and losses are recorded in the pension plan obligation and accumulated other comprehensive income (loss). These amounts are systematically recognized to net periodic pension expense in future periods, with gains decreasing and losses increasing future pension expense. If actuarial net gains or losses exceed 5% of the greater of the projected benefit obligation and the market-

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related value of plan assets, the excess is recognized through the net periodic pension expense equally over the estimated service period of the employee group, which is currently 14 years.

The expected long-term rate of return for the pension plan represents the average rate of return to be earned on plan assets over the period the benefits included in the benefit obligation are to be paid. To determine the expected long-term rate of return assumption, we utilized models based upon rigorous historical analysis and forward-looking views of the financial markets based upon key factors such as historical returns for the asset class' applicable indices, the correlations of the asset classes under various market conditions and consensus views on future real economic growth and inflation. The expected future return for each asset class is then combined by considering correlations between asset classes and the volatilities of each asset class to produce a reasonable range of asset return results within which our expected long-term rate of return assumption falls. While the expected long-term rate of return is generally less susceptible to annual revisions as there are typically no significant changes in the asset mix, we increased the expected return on asset assumption from 6.50% to 7.00% in 2024 based on the current asset allocation and considering a review of the key factors and expectations of future performance as well as the current market environment. A change of 25 basis points in the expected long-term rate of return assumption, with other assumptions held constant, would have an estimated $2.9 million impact on net pension benefit cost in the following year, of which our share would be approximately $1.2 million.

We use a four-year averaging method to determine the market-related value of plan assets, which is used to determine the expected return component of pension expense. Under this methodology, asset gains or losses that result from returns that differ from our long-term rate of return assumption are recognized in the market-related value of assets on a level basis over a four-year period. The market-related asset experience during 2023 that related to the actual investment return being different from that assumed during the prior year was a gain of $36.8 million. Recognition of this gain will be deferred and recognized over a four-year period, consistent with the market-related asset value methodology. Once factored into the market-related asset value, these experience gains and losses will be amortized over a period of 14 years, which is the remaining service period of the employee group.

In 2023, we recognized net pension benefit income of $3.8 million primarily driven by higher discount rates and expected return on assets, partially offset by lower than expected returns during 2022. We continue to project net pension benefit income in 2024 as opposed to expense. While our discount rate assumptions decreased for 2024, the estimated increase in net pension benefit income to $4.3 million in 2024 is primarily due to an anticipated one-time SERP settlement credit of $1.0 million. Our share of the net pension benefit income after reimbursements was $0.9 million in 2023. We expect our share of the net pension benefit income to be approximately $1.4 million in 2024, of which expense of $13.0 million will be recorded in operating expense and income of $14.4 million will be recorded in other income.

The actuarial assumptions we used in determining our pension obligation may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates, or longer or shorter life spans of participants. While we believe that the assumptions used are appropriate, differences in actual experience or changes in assumptions may materially affect our financial position, results of operations, or cash flows. See Item 8. "Financial Statements and Supplementary Data - Note 9, Postretirement Benefits, of Notes to Financial Statements" contained within this report for additional details on the pension plans.

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RESULTS OF OPERATIONS

Management fee revenue

We have two performance obligations in the subscriber’s agreement, providing policy issuance and renewal services and acting as attorney-in-fact for the subscribers at the Exchange, as well as the service provider for the Exchange's insurance subsidiaries, with respect to all administrative services. We retain management fees for acting as the attorney-in-fact for the subscribers at the Exchange in these two capacities and allocate our revenues between our performance obligations.

The management fee is calculated by multiplying all direct and affiliated assumed premiums written by the Exchange by the management fee rate, which is determined by our Board of Directors at least annually. The management fee rate was set at 25% for 2023, 2022 and 2021. Changes in the management fee rate can affect our revenue and net income significantly. The transaction price, including management fee revenue and administrative services reimbursement revenue, includes variable consideration and is allocated based on the estimated standalone selling prices developed using industry information and other available information for similar services. We update the transaction price and the related allocation at least annually based upon the most recent information available or more frequently if there have been significant changes in any components considered in the transaction price.

The following table presents the allocation and disaggregation of revenue for our two performance obligations:


	Years ended December 31,
(dollars in thousands)	2023			% Change		2022			% Change		2021

Policy issuance and renewal services
Direct and affiliated assumed premiums written by the Exchange	$	10,056,484		17.0	%	$	8,595,960		9.2	%	$	7,868,311
Management fee rate	24.30		%			24.30		%			24.30		%
Management fee revenue	2,443,726			17.0		2,088,818			9.2		1,912,000
Change in estimate for management fee returned on cancelled policies (1)	(1,653)			(70.0)		(972)			NM		1,166
Management fee revenue - policy issuance and renewal services	$	2,442,073		17.0	%	$	2,087,846		9.1	%	$	1,913,166

Administrative services
Direct and affiliated assumed premiums written by the Exchange	$	10,056,484		17.0	%	$	8,595,960		9.2	%	$	7,868,311
Management fee rate	0.70		%			0.70		%			0.70		%
Management fee revenue	70,395			17.0		60,172			9.2		55,078
Change in contract liability (2)	(6,690)			NM		(1,865)			NM		3,195
Change in estimate for management fee returned on cancelled policies (1)	(36)			NM		16			24.7		13

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

NM = not meaningful

(1) A constraining estimate of variable consideration exists related to the potential for management fees to be returned if a policy were to be cancelled mid-term. Management fees are returned to the Exchange when policies are cancelled mid-term and unearned premiums are refunded.

(2) Management fee revenue - administrative services is recognized over time as the services are provided. See Item 8. "Financial Statements - Note 3, Revenue, of Notes to Financial Statements" contained within this report.

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Direct and affiliated assumed premiums written by the Exchange

Direct and affiliated assumed premiums include premiums written directly by the Exchange and premiums assumed from its wholly owned property and casualty subsidiaries. Direct and affiliated assumed premiums written by the Exchange increased 17.0% to $10.1 billion in 2023, from $8.6 billion in 2022, primarily driven by increased personal lines and commercial multi-peril premiums written. Year-over-year policies in force for all lines of business increased 6.9% in 2023 as the result of continuing strong policyholder retention and an increase in new policies written, compared to 3.6% in 2022. The year-over-year average premium per policy for all lines of business increased 9.4% at December 31, 2023, compared to 5.4% at December 31, 2022.

Premiums generated from new business increased 37.9% to $1.5 billion in 2023. Contributing to this change was a 23.7% increase in new business policies written and a 11.5% increase in year-over-year average premium per policy on new business at December 31, 2023. Premiums generated from new business increased 14.5% to $1.1 billion in 2022. Year-over-year average premium per policy on new business increased 10.4% at December 31, 2022 and new business policies written increased 3.7% in 2022.

Premiums generated from renewal business increased 13.9% to $8.5 billion in 2023, and increased 8.5% to $7.5 billion, in 2022. Underlying the trend in renewal business premiums in both periods were increases in year-over-year average premium per policy of 9.0% at December 31, 2023 and 4.7% at December 31, 2022, as well as an increase in year-over-year policies in force of 4.5% and 3.6% in 2023 and 2022, respectively, driven by a slight increase in policy retention ratios.

The Exchange implements rate changes in order to meet loss cost expectations. In response to reduced driving conditions in 2020 resulting from the COVID-19 pandemic, the Exchange implemented $200 million in personal and commercial auto rate reductions on policies written between July 1, 2020 and June 30, 2021, which negatively impacted Exchange's written premium in 2021 by approximately $110 million. The Exchange began implementing rate increases in 2021 primarily due to increased claims frequency as driving activity returned to near pre-pandemic levels and continued to implement rate increases in 2022 and 2023 primarily as a result of inflation-driven severity increases.

As the Exchange writes policies with annual terms only, rate actions take 12 months to be fully recognized in written premium and 24 months to be recognized in earned premiums. Since rate changes are realized at renewal, it takes 12 months to implement a rate change to all policyholders and another 12 months to earn the increased or decreased premiums in full. As a result, certain rate changes approved in 2022 were reflected in 2023, and a portion of the rate actions approved in 2023 will be reflected in 2024. Furthermore, the Exchange writes certain personal auto policies with a rate locking feature, which generally extends the amount of time it takes for rate actions to be recognized. The Exchange continuously evaluates pricing and product offerings to meet consumer demands.

Personal lines – Total personal lines premiums written increased 18.7% to $7.1 billion in 2023, from $6.0 billion in 2022, driven by a 10.5% increase in total personal lines year-over-year average premium per policy and a 7.4% increase in total personal lines policies in force. Total personal lines year-over-year average premium per policy increased 4.4% at December 31, 2022 and policies in force increased 3.9% in 2022.

Commercial lines – Total commercial lines premiums written increased 13.0% to $3.0 billion in 2023, compared to 2022, driven by a 9.5% increase in the total commercial lines year-over-year average premium per policy and a 3.2% increase in total commercial lines policies in force. Total commercial lines premiums written increased 11.2% in 2022, compared to 2021, driven by a 9.0% increase in the total commercial lines year-over-year average premium per policy and a 2.0% increase in total commercial lines policies in force.

Future trends-premium revenue – Through a careful agency selection and monitoring process, the Exchange plans to continue efforts to utilize its agency force to increase market penetration in existing operating territories to contribute to future growth.

Changes in premium levels attributable to the growth in policies in force directly affect the profitability of the Exchange and have a direct bearing on our management fee. Our continued focus on underwriting discipline and the maturing of pricing sophistication models have contributed to the Exchange's steady policy retention ratios. The continued growth of its policy base is dependent upon the Exchange's ability to retain existing and attract new subscribers/policyholders. A lack of new policy growth or the inability to retain existing customers could have an adverse effect on the Exchange's premium level growth, and consequently our management fee.

Changes in premium levels attributable to rate changes also directly affect the profitability of the Exchange and have a direct bearing on our management fee. Pricing actions contemplated or taken by the Exchange are subject to various regulatory requirements of the states in which it operates. The pricing actions already implemented, or to be implemented, have an effect on the market competitiveness of the Exchange's insurance products. Such pricing actions, and those of the Exchange's

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competitors, could affect the ability of the Exchange's agents to retain and attract new business. We expect the Exchange's pricing actions in 2023 to result in an increase in direct written premiums in 2024; however, exposure reductions and/or changes in mix of business as a result of economic conditions could impact the average direct and affiliated assumed premium written by the Exchange, as customers may reduce coverages.

Policy issuance and renewal services


	Years ended December 31,
(dollars in thousands)	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
	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

Policy issuance and renewal services

The management fee revenue allocated for providing policy issuance and renewal services was 24.30% of the direct and affiliated assumed premiums written by the Exchange for 2023, 2022, and 2021. This portion of the management fee is recognized as revenue when the policy is issued or renewed because it is at that time that the services we provide are substantially complete and the executed insurance policy is transferred to the customer. The increase in management fee revenue for policy issuance and renewal services was driven by the increase in the direct and affiliated assumed premiums written by the Exchange discussed previously.

Service agreement revenue

Service agreement revenue primarily consists of service charges we collect from subscribers/policyholders for providing multiple payment plans on policies written by the Exchange and its property and casualty subsidiaries and also includes late payment and policy reinstatement fees. The service charges are fixed dollar amounts per billed installment. Service agreement revenue also includes fees received from the Exchange for the use of shared office space. The increase in service agreement revenue in 2023 and 2022 is primarily due to an increase in shared office space revenue.

Cost of policy issuance and renewal services


	Years ended December 31,
(dollars in thousands)	2023		% Change		2022		% Change		2021

Commissions:
Total commissions	$	1,348,530	14.3	%	$	1,179,569	6.4	%	$	1,108,426
Non-commission expense:
Underwriting and policy processing	$	181,003	5.5	%	$	171,625	3.9	%	$	165,183
Information technology	216,746		9.4		198,157		7.1		185,096
Sales and advertising	58,905		(1.8)		60,000		14.3		52,511
Customer service	34,391		0.2		34,333		(6.5)		36,720
Administrative and other	171,970		13.2		151,958		17.4		129,461
Total non-commission expense	663,015		7.6		616,073		8.3		568,971
Total cost of policy issuance and renewal services	$	2,011,545	12.0	%	$	1,795,642	7.0	%	$	1,677,397

Commissions – Commissions increased $169.0 million in 2023 compared to 2022, primarily driven by the growth in direct and affiliated assumed written premium, partially offset by a decrease in agent incentive compensation. The profitability component of agent incentive compensation decreased due to higher claims severity and related loss costs in the three-year period ended 2023 compared to the three-year period ended 2022. Commissions increased $71.1 million in 2022 compared to 2021, primarily driven by the growth in direct and affiliated assumed written premium, partially offset by a decrease in agent

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incentive compensation. The profitability component of agent incentive compensation decreased due to higher claims severity and related loss costs experienced primarily in 2022.

Non-commission expense – Non-commission expense increased $46.9 million in 2023 compared to 2022. Underwriting and policy processing costs increased $9.4 million primarily due to policies in force growth. Information technology costs increased $18.6 million primarily due to increased professional fees, personnel costs, and hardware and software costs. Administrative and other expenses increased $20.0 million primarily due to an increase in personnel costs. Personnel costs in 2023 were impacted by increased compensation including higher estimated costs for incentive plan awards, partially offset by lower pension costs due to an increase in the discount rate compared to 2022. Increases in incentive plan costs were driven by improved direct written premium and policies in force growth and Indemnity's higher stock price at year-end 2023 compared to 2022.

In 2022, non-commission expense increased $47.1 million compared to 2021. Underwriting and policy processing costs increased $6.4 million primarily due to increased underwriting report, printing, and personnel costs. Information technology costs increased $13.1 million primarily due to increased hardware and software costs and professional fees, partially offset by decreased personnel costs. Sales and advertising costs increased $7.5 million primarily due to increased advertising and agent-related expenses. Administrative and other expenses increased $22.5 million primarily due to an increase in personnel costs related to compensation and increased professional fees.

Administrative services


	Years ended December 31,
(dollars in thousands)	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

The management fee revenue allocated to administrative services was 0.70% of the direct and affiliated assumed premiums written by the Exchange for 2023, 2022, and 2021. This portion of the management fee is recognized as revenue over a four-year period representing the time over which the services are provided. We also report reimbursed costs as revenues, which are recognized monthly as services are provided. The administrative services expenses we incur and the related reimbursements we receive are recorded gross in the Statements of Operations.

Cost of administrative services

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Total investment income

A summary of the results of our investment operations is as follows for the years ended December 31:




(dollars in thousands)	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

NM = not meaningful

Net investment income

Net investment income includes interest and dividends on our fixed maturity and equity security portfolios and the results of our limited partnership investments, net of investment expenses. Net investment income increased $16.0 million in 2023, compared to 2022, primarily due to an increase in bond and cash and cash equivalent income as a result of higher yields and increased rates. Net investment income decreased $33.6 million in 2022, compared to 2021, primarily due to equity in (losses) earnings of limited partnerships. Net investment income includes equity in losses of limited partnerships of $11.3 million and $10.4 million in 2023 and 2022, respectively, and equity in earnings of limited partnerships of $31.7 million in 2021.

Net realized and unrealized investment (losses) gains

A breakdown of our net realized and unrealized investment (losses) gains is as follows for the years ended December 31:




(in thousands)	2023		2022		2021
Securities sold:
Available-for-sale securities	$	(6,719)	$	(14,050)	$	5,131
Equity securities	(2,328)		(1,866)		(76)
Change in fair value on remaining equity securities	3,199		(11,372)		(110)
Miscellaneous	10		2		1
Net realized and unrealized investment (losses) gains	$	(5,838)	$	(27,286)	$	4,946

Net realized and unrealized losses of $5.8 million in 2023 were primarily due to disposals of available-for-sale and equity securities, partially offset by market value adjustment gains on equity securities. Net realized and unrealized losses of $27.3 million in 2022 were primarily due to disposals of available-for-sale securities and market value adjustments on equity securities, while gains of $4.9 million in 2021 were primarily due to disposals of available-for-sale securities.

Net impairment (losses) recoveries recognized in earnings

Net impairment losses of $9.8 million in 2023 include $7.3 million of current expected credit losses recognized on loans receivable related to real estate development projects supporting the revitalization efforts in our community. See "Other assets" in Item 8. "Financial Statements and Supplementary Data - Note 2, Significant Accounting Policies, of Notes to Financial Statements" for additional information. Impairment losses in 2023 also include $2.4 million related to available-for-sale securities, including $1.8 million of securities in an unrealized loss position where we had intent to sell prior to recovery of our amortized cost basis and $0.7 million of credit impairment losses. Net impairment losses of $0.7 million in 2022 were related to available-for-sale securities and include $0.5 million of credit impairment losses and $0.2 million of securities in an unrealized loss position where we had intent to sell prior to recovery of our amortized cost basis. Net impairment recoveries of $0.2 million in 2021 were primarily the result of a change in the current expected credit loss allowance related to our agent loans.

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Financial Condition of Erie Insurance Exchange

Serving in the capacity of attorney-in-fact for the subscribers at the Exchange, we are dependent on the growth and financial condition of the Exchange, who is our sole customer. The strength of the Exchange and its wholly owned subsidiaries is rated annually by A.M. Best through assessing its financial stability and ability to pay claims. The ratings are generally based upon factors relevant to policyholders and are not directed toward return to investors. The Exchange and each of its property and casualty subsidiaries are rated A+ "Superior", the second highest financial strength rating, which is assigned to companies that have achieved superior overall performance when compared to the standards established by A.M. Best and have a superior ability to meet obligations to policyholders over the long term. On August 10, 2023, the outlook for the financial strength rating was affirmed as stable. As of December 31, 2023, only approximately 12% of insurance groups, in which the Exchange is included, are rated A+ or higher.

The financial statements of the Exchange are prepared in accordance with statutory accounting principles prescribed by the Commonwealth of Pennsylvania. Financial statements prepared under statutory accounting principles focus on the solvency of the insurer and generally provide a more conservative approach than under U.S. generally accepted accounting principles. Statutory direct written premiums of the Exchange and its wholly owned property and casualty subsidiaries grew 17.0% to $10.1 billion in 2023 from $8.6 billion in 2022. These premiums, along with investment income, are the major sources of cash that support the operations of the Exchange. Policyholders' surplus, determined under statutory accounting principles, was $9.3 billion and $10.1 billion at December 31, 2023 and 2022, respectively. The Exchange and its wholly owned property and casualty subsidiaries' year-over-year policy retention ratio continues to be high at 91.2% at December 31, 2023 and 90.5% at December 31, 2022.

We have prepared our financial statements considering the financial strength of the Exchange based on its A.M. Best rating and strong level of surplus. See Part I, Item 1A. "Risk Factors" for possible outcomes that could impact that determination.

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FINANCIAL CONDITION

Investments

Our investment portfolio is managed with the objective of maximizing after-tax returns on a risk-adjusted basis. The following table presents the carrying value of our investments as of December 31:


(dollars in thousands)	2023		% to total		2022		% to total
Fixed maturities	$	961,241	85	%	$	894,661	84	%
Equity securities	84,253		7		72,560		7
Agent loans (1)	67,787		6		69,476		7
Other investments (2)	23,026		2		30,511		2
Total investments	$	1,136,307	100	%	$	1,067,208	100	%

(1)The current portion of agent loans is included in the line item "Prepaid expenses and other current assets" in the Statements of Financial Position.

(2)The current and long-term portions of other investments are included in the line items "Prepaid expenses and other current assets" and "Other assets, net", respectively, in the Statements of Financial Position.

We continually review our investment portfolio for impairment and determine whether the impairment is a result of credit loss or other factors. We analyze all positions with an emphasis on those in a significant unrealized loss position. If we have the intent to sell or it's more likely than not that we would be required to sell the security before recovery of the amortized cost basis, the entire impairment is recognized in earnings. Factors considered in the evaluation of credit loss include the extent to which fair value is less than cost and fundamental factors specific to the issuer such as financial condition, changes in credit ratings, near and long-term business prospects and other factors, as well as the likelihood of recovery of the amortized cost of the security. Impairment resulting from credit loss is recognized in earnings with a corresponding allowance on the Statement of Financial Position. We believe our investment valuation philosophy and accounting practices result in appropriate and timely measurement of fair value and recognition of impairment.

Fixed maturities

Under our investment strategy, we maintain a fixed maturity portfolio that is of high quality and well diversified within each market sector. This investment strategy also achieves a balanced maturity schedule. Our fixed maturity portfolio is managed with the goal of achieving reasonable returns while limiting exposure to risk.

Fixed maturities are carried at fair value with unrealized gains and losses, net of deferred taxes, included in shareholders' equity. Net unrealized losses on fixed maturities, net of deferred taxes, totaled $24.7 million at December 31, 2023, compared to $52.5 million at December 31, 2022. Our evaluation of deferred tax assets and the need for a valuation allowance included available tax planning strategies that could be implemented, if necessary, to support the realizability of deferred tax assets. We believe those tax strategies are feasible and prudent.

The following table presents a breakdown of the fair value of our fixed maturity portfolio by industry sector and rating as of December 31, 2023: (1)




(in thousands)	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 (2)	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

(1) Ratings are supplied by S&P, Moody’s, and Fitch. The table is based upon the lowest rating for each security.

(2) Structured securities include residential and commercial mortgage-backed securities, collateralized debt obligations, and asset-backed securities.

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Equity securities

Equity securities primarily include nonredeemable preferred stocks and are carried at fair value in the Statements of Financial Position with all changes in unrealized gains and losses reflected in the Statements of Operations.

The following table presents an analysis of the fair value of our equity securities by sector as of December 31:


(in thousands)	2023	2022


61,084









72,560

Shareholders' Equity

Postretirement benefit plans

The funded status of our postretirement benefit plans is recognized in the Statements of Financial Position, with a corresponding adjustment to accumulated other comprehensive income (loss), net of tax. At December 31, 2023, shareholders' equity amounts related to these postretirement plans decreased by $33.8 million, net of tax, of which $11.0 million represents amortization of the prior service cost and net actuarial gain and $22.8 million represents the current period actuarial loss. The 2023 actuarial loss was driven primarily by the lower discount rate used to measure the future benefit obligations, partially offset by higher than expected return on plan assets. At December 31, 2022, shareholders' equity amounts related to these postretirement plans increased by $76.5 million, net of tax, of which $6.9 million represents amortization of the prior service cost and net actuarial loss and $69.6 million represents the current period actuarial gain. The 2022 actuarial gain was driven by the higher discount rate, offset by lower than expected return on plan assets. Although we are the sponsor of these postretirement plans and record the funded status of these plans, there are reimbursements between us and the Exchange and its subsidiaries for their allocated share of pension income or cost. See Item 8. "Financial Statements and Supplementary Data - Note 9, Postretirement Benefits, of Notes to Financial Statements" contained within this report for additional details on these reimbursements.

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LIQUIDITY AND CAPITAL RESOURCES

We continue to monitor the sufficiency of our liquidity and capital resources given the potential impact of current economic

conditions, including the uncertain inflationary and interest rate environment. While we did not see a significant impact on our sources or uses of cash in 2023, future disruptions in the markets could occur which may affect our liquidity position. If our normal operating and investing cash activities were to become insufficient to meet future funding requirements, we believe we have sufficient access to liquidity through our cash position, diverse liquid marketable securities, and our $100 million bank revolving line of credit that does not expire until October 2026. See broader discussions of potential risks to our operations in Part I, Item 1A. "Risk Factors" contained within this report.

Sources and Uses of Cash

Liquidity is a measure of a company's ability to generate sufficient cash flows to meet the short- and long-term cash requirements of its business operations and growth needs. Our liquidity requirements have been met primarily by funds generated from management fee revenue and income from investments. Cash provided from these sources is used primarily to fund the costs of our management operations including commissions, salaries and wages, pension plans, share repurchases, dividends to shareholders, the purchase and development of information technology, and other capital expenditures. We expect that our operating cash needs will be met by funds generated from operations. Cash in excess of our operating needs is primarily invested in investment grade fixed maturities. As part of our liquidity review, we regularly evaluate our capital needs based on current and projected results and consider the potential impacts to our liquidity, borrowing capacity, financial covenants and capital availability.

We have certain obligations and commitments to make future payments under various agreements. Cash requirements within the next twelve months include accounts payable, accrued liabilities, and other current obligations.

Our long-term cash requirements under various contractual obligations and commitments include:

•Pension – We have a funded noncontributory defined benefit pension plan covering substantially all employees and an unfunded SERP for certain members of executive and senior management. See Item 8. "Financial Statements and Supplementary Data - Note 9, Postretirement Benefits, of Notes to Financial Statements" for the funding policy and related contributions for our defined benefit pension plan, and accumulated benefit obligation for our unfunded SERP.

•Deferred compensation – We have two deferred compensation plans for our executives, senior vice presidents, and other selected officers and two deferred compensation plans for our outside directors. See Item 8. "Financial Statements and Supplementary Data - Note 10, Incentive and Deferred Compensation Plans, of Notes to Financial Statements" for additional details of these obligations and estimated future payments.

•Home office renovations – We have an agreement with an external contracting firm for renovations to an office building that is part of our principal headquarters. Remaining commitments related to the underlying contracts due in the next 12 months totaled $30.8 million at December 31, 2023. Additional contracts will be executed as we begin each new phase of the overall renovation project and will be funded using our working capital. See Item 8. "Financial Statements and Supplementary Data - Note 7, Fixed Assets, of Notes to Financial Statements" for additional details on construction in progress costs and expected completion date.

•Other commitments – We have commitments for approximately $531 million which include agreements for various services, including information technology, support and maintenance obligations, operating leases for equipment, vehicles and real estate, and other obligations in the ordinary course of business. We expect to make future cash payments according to the contract terms. These agreements are enforceable and legally binding and specify fixed amounts or minimum quantities to be purchased. Some agreements may contain cancellation provisions, some of which may require us to pay a termination fee. Over half of these commitments are due in the next 12 months. We are reimbursed from the Exchange and its subsidiaries for the portion of these costs related to administrative services.

We maintain relationships and cash balances at diversified and well-capitalized financial institutions and have established processes to monitor them. We believe that our current cash, cash equivalents and marketable securities and cash generated from operations will be sufficient to meet our current and future cash requirements.

Volatility in the financial markets presents challenges to us as we occasionally access our investment portfolio as a source of cash. Some of our fixed income investments, despite being publicly traded, may be illiquid. Volatility in these markets could impair our ability to sell certain fixed income securities or cause such securities to sell at deep discounts. We believe we have sufficient liquidity to meet our needs from sources other than the liquidation of securities.

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Cash flow activities

The following table provides condensed cash flow information for the years ended December 31:



(in thousands)	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

Net cash provided by operating activities was $381.2 million in 2023, compared to $366.2 million in 2022 and $402.8 million in 2021. Increased cash provided by operating activities in 2023, compared to 2022, was primarily due to an increase in management fees received of $319.2 million driven by growth in direct and affiliated assumed premiums written by the Exchange. This was partially offset by increases in cash paid for agent commissions of $157.9 million driven by premium growth, pension and employee benefits paid of $101.3 million primarily due to a $95.0 million pension contribution in 2023, and general operating expenses paid of $30.3 million primarily driven by higher information technology-related professional fees and hardware and software costs. Decreased cash provided by operating activities in 2022, compared to 2021, was primarily due to increases in cash paid for agent commissions of $75.9 million driven by premium growth, administrative services expenses paid of $35.0 million and a pension contribution of $25.0 million. Partially offsetting this decrease in cash provided by operating activities was an increase in management fees received of $118.9 million driven by growth in direct and affiliated assumed premiums written by the Exchange.

Net cash used in investing activities totaled $157.6 million in 2023, compared to $106.9 million in 2022 and $185.5 million in 2021. In 2023 and 2022, net cash used in investing activities was primarily driven by fixed asset purchases of $92.6 million and $67.2 million, respectively, mostly related to software and home office renovations. Additionally, purchases of investments exceeded proceeds generated from sales and maturities/calls of investments in both periods, while 2023 also included $13.6 million in loans issued to fund real estate development projects supporting revitalization efforts in our community. In 2021, net cash used in investing activities was mainly driven by fixed asset purchases of $148.8 million, which included the purchase of the home office from the Exchange. To a lesser extent, purchases of investments exceeded proceeds generated from sales and maturities/calls of investments.

Net cash used in financing activities totaled $221.7 million in 2023, compared to $300.8 million in 2022 and $194.8 million in 2021. Changes in cash related to financing activities were primarily due to the repayment of the remaining $93.2 million balance on the term loan in 2022.

Capital Outlook

We regularly prepare forecasts evaluating the current and future cash requirements for both normal and extreme risk events, including under current inflationary conditions and a higher interest rate environment. Should an extreme risk event result in a cash requirement exceeding normal cash flows, we have the ability to meet our future funding requirements through various alternatives available to us.

Outside of our normal operating and investing cash activities, future funding requirements could be met through: 1) unrestricted and unpledged cash and cash equivalents, which total approximately $128.7 million at December 31, 2023, 2) $100 million available bank revolving line of credit, and 3) liquidation of unpledged assets held in our investment portfolio, including equity securities and investment grade bonds which totaled approximately $799.0 million at December 31, 2023. Volatility in the financial markets could impair our ability to sell certain fixed income securities or cause such securities to sell at deep discounts. Additionally, we have the ability to curtail or modify discretionary cash outlays such as those related to shareholder dividends and share repurchase activities.

As of December 31, 2023, we have access to a $100 million bank revolving line of credit. See Item 8. "Financial Statements and Supplementary Data - Note 8, Bank Line of Credit, of Notes to Financial Statements" for additional information.

Off-Balance Sheet Arrangements

We have entered into certain contingent obligations for guarantees. See Item 8. "Financial Statements and Supplementary Data - Note 16, Commitments and Contingencies, of Notes to Financial Statements" for additional information. We do not believe that these obligations will have a material current or future effect on our financial condition, results of operations, or cash flows.

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Enterprise Risk Management

The role of our Enterprise Risk Management ("ERM") function is to ensure that all significant risks are clearly identified, understood, proactively managed and consistently monitored to achieve strategic objectives for all stakeholders. Our ERM program views risk holistically across our entire group of companies. It ensures implementation of risk responses to mitigate potential impacts. See Part I, Item 1A. "Risk Factors" contained in this report for a list of risk factors.

Our ERM process is founded on a governance framework that includes oversight at multiple levels of our organization, including our Board of Directors and executive management. Accountability to identify, manage, and mitigate risk is embedded within all functions and areas of our business. We have defined risk tolerances to monitor and manage significant risks within acceptable levels. In addition to identifying, evaluating, prioritizing, monitoring, and mitigating significant risks, our ERM process includes extreme event analyses and scenario testing. Given our defined tolerance for risk, risk model output is used to quantify the potential variability of future performance and the sufficiency of capital and liquidity levels.

TRANSACTIONS/AGREEMENTS WITH RELATED PARTIES

Board Oversight

Our Board of Directors has a broad oversight responsibility over our intercompany relationships with the Exchange. Thus, our Board of Directors may be required to make decisions or take actions that may benefit subscribers at the Exchange and the overall health of the Exchange. These actions may ultimately benefit our shareholders.

Insurance Holding Company System

Most states have enacted legislation that regulates insurance holding company systems, defined as two or more affiliated persons, one or more of which is an insurer. The Exchange has the following wholly owned property and casualty subsidiaries: Erie Insurance Company, Erie Insurance Company of New York, Erie Insurance Property & Casualty Company and Flagship City Insurance Company, and a wholly owned life insurance company, Erie Family Life Insurance Company. Indemnity and the Exchange, and its wholly owned subsidiaries, meet the definition of an insurance holding company system.

Transactions within a holding company system affecting the member insurers of the holding company system must be fair and reasonable and any charges or fees for services performed must be reasonable. Approval by the applicable insurance commissioner is required prior to the consummation of certain transactions affecting the members within a holding company system.

Intercompany Agreements

Subscriber's and services agreements

We serve as attorney-in-fact for the subscribers at the Exchange, a reciprocal insurance exchange. Each applicant for insurance to a reciprocal insurance exchange (a subscriber) signs a subscriber's agreement that contains an appointment of an attorney-in-fact. Through the designation of attorney-in-fact, we are required to provide policy issuance and renewal services and act as the attorney-in-fact for the subscribers at the Exchange with respect to all administrative services, as discussed previously. In accordance with the subscriber's agreement, we retain a management fee for these services calculated as a percentage of the direct and affiliated assumed premiums written by the Exchange. Consistent with its legal structure as a reciprocal insurer, the Exchange does not have any employees or officers. Therefore, it enters into contractual relationships by and through the subscribers' attorney-in-fact. The Exchange's insurance subsidiaries also utilize Indemnity for all administrative services in accordance with the service agreements between each of the subsidiaries and Indemnity. The subscriber's agreement and service agreements provide for reimbursement of amounts incurred for these services to Indemnity. Reimbursements are settled at cost on a monthly basis. State insurance regulations require that intercompany service agreements and any material amendments be approved in advance by the state insurance department.

Shared facilities

The Exchange and its subsidiaries have a service agreement with Indemnity to use space in Indemnity-owned properties. See Item 8. "Financial Statements and Supplementary Data - Note 14, Related Party, of Notes to Financial Statements" for additional details.

Cost Allocation

The allocation of costs affects our financial condition and that of the Exchange and its wholly owned subsidiaries. Management's role is to determine that allocations are consistently made in accordance with the subscriber's agreement with the subscribers at the Exchange, intercompany service agreements, and applicable insurance laws and regulations. Allocation of costs under these various agreements requires judgment and interpretation by Indemnity, and such allocations are performed using a consistent methodology, which is intended to adhere to the terms and intentions of the underlying agreements.

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Intercompany Receivables

We have significant receivables from the Exchange and its affiliates that result in a concentration of credit risk. Net receivables from the Exchange and other affiliates were $625.3 million, or 25.3% of total assets, at December 31, 2023 and $524.9 million, or 23.4% of total assets, at December 31, 2022. These receivables include management fees due for policy issuance and renewal services performed by us under the subscriber's agreement, and certain costs we incur acting as the attorney-in-fact on behalf of the subscribers at the Exchange as well as the service provider for the Exchange's insurance subsidiaries with respect to all administrative services, as discussed previously. These receivables from the Exchange and other affiliates are settled monthly. We continually monitor the financial strength of the Exchange.

Other Loans Receivable

In December 2023, we issued two senior secured loans totaling $13.6 million to fund a real estate development project supporting revitalization efforts in our community. Ownership in the project includes related party and unrelated investors. See Item 8. "Financial Statements and Supplementary Data - Note 14, Related Party, of Notes to Financial Statements" for additional details.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

Market risk is the risk of loss arising from adverse changes in interest rates, credit spreads, equity prices, or foreign exchange rates, as well as other relevant market rate or price changes. The volatility and liquidity in the markets in which the underlying assets are traded directly influence market risk. The following is a discussion of our primary risk exposures, including interest rate risk, investment credit risk, concentration risk, liquidity risk, and equity price risk, and how those exposures are currently managed as of December 31, 2023.

Interest Rate Risk

We invest primarily in fixed maturity investments, which comprised 85% of our invested assets at December 31, 2023. The value of the fixed maturity portfolio is subject to interest rate risk. As market interest rates decrease, the value of the portfolio increases with the opposite holding true in rising interest rate environments. We do not hedge our exposure to interest rate risk. A common measure of the interest sensitivity of fixed maturity assets is effective duration, a calculation that utilizes maturity, coupon rate, yield, and call terms to calculate an expected change in fair value given a change in interest rates. The longer the duration, the more sensitive the asset is to market interest rate fluctuations. Duration is analyzed at least quarterly to ensure that it remains in the targeted range.

A sensitivity analysis is used to measure the potential loss in future earnings, fair values, or cash flows of interest-sensitive instruments resulting from one or more selected hypothetical changes in interest rates and other market rates or prices over a selected period. The following pro forma information is presented assuming a 100-basis point parallel increase in interest rates across the yield curve at December 31 of each year and reflects the estimated effect on the fair value of our fixed maturity portfolio.

Fixed maturities interest-rate sensitivity analysis



(dollars in thousands)	At December 31,
	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

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While the fixed maturity portfolio is sensitive to interest rates, the future principal cash flows that will be received by contractual maturity date are presented below at December 31, 2023 and 2022. Actual cash flows may differ from those stated as a result of calls, prepayments, or defaults.

Contractual repayments of principal by maturity date


(in thousands)
Fixed maturities:	December 31, 2023
2024	$	81,072
2025	96,519
2026	79,385
2027	116,418
2028	137,065
Thereafter	481,895
Total	$	992,354
Fair value	$	961,241


(in thousands)
Fixed maturities:	December 31, 2022
2023	$	24,561
2024	104,164
2025	125,785
2026	79,745
2027	116,571
Thereafter	500,905
Total	$	951,731
Fair value	$	894,661

Investment Credit Risk

Our objective is to earn competitive returns by investing in a diversified portfolio of securities. Our portfolios of fixed maturity securities, equity securities and, to a lesser extent, short-term investments are subject to credit risk. This risk is defined as the potential loss in fair value resulting from adverse changes in the borrower's ability to repay the debt. We manage this risk by performing upfront underwriting analysis and ongoing reviews of credit quality by position and for the portfolio in total. We do not hedge the credit risk inherent in our fixed maturity and equity securities investments.

Generally, the fixed maturities in our portfolio are rated by external rating agencies. If not externally rated, we rate them internally on a basis consistent with that used by the rating agencies. We classify all fixed maturities as available-for-sale securities, allowing us to meet our liquidity needs and provide greater flexibility to appropriately respond to changes in market conditions.

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The following tables show our fixed maturity investments by rating(1):


	At December 31, 2023
(dollars in thousands)	Amortized cost		Fair value		Percent of total
AAA, AA, A	$	537,751	$	515,175	54	%
BBB	324,538		318,362		33
Total investment grade	862,289		833,537		87
BB	51,564		50,170		5
B	65,453		65,251		7
CCC, CC, C, and below	13,247		12,283		1
Total non-investment grade	130,264		127,704		13
Total	$	992,553	$	961,241	100	%

961,135 $894,661 100 %

(1) Ratings are supplied by S&P, Moody's, and Fitch. The table is based upon the lowest rating for each security.

We are also exposed to a concentration of credit risk with the Exchange. See the "Transactions/Agreements with Related Parties, Intercompany Receivables" section of Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained within this report for further discussion of this risk.

Concentration Risk

While our portfolio is well diversified within each market sector, there is an inherent risk of concentration in a particular industry or sector. We continually monitor our level of exposure to individual issuers as well as our allocation to each industry and market sector against internally established policies. See the "Financial Condition" section of Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained within this report for details of investment holdings by sector.

Liquidity Risk

Periods of volatility in the financial markets can create conditions where fixed maturity investments, despite being publicly traded, can become illiquid. However, we actively manage the maturity profile of our fixed maturity portfolio such that scheduled repayments of principal occur on a regular basis.

Equity Price Risk

Our portfolio of equity securities, which primarily includes nonredeemable preferred stock, is carried on the Statements of Financial Position at estimated fair value. Equity securities are exposed to the risk of potential loss in estimated fair value resulting from an adverse change in prices ("price risk"). We do not hedge our exposure to price risk inherent in our equity investments.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Erie Indemnity Company

Opinion on the Financial Statements

We have audited the accompanying statements of financial position of Erie Indemnity Company (the Company) as of December 31, 2023 and 2022, the related statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 26, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

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Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.


						Proportional Cost Allocation
Description of the Matter						For the year ended December 31, 2023, the Company’s administrative services reimbursement revenue totaled $737.1 million. The Company’s primary function, as attorney-in-fact, is to perform certain services on behalf of the subscribers at the Erie Insurance Exchange (Exchange) and its insurance subsidiaries, in accordance with the subscriber’s agreement and the service agreements with each of the Exchange’s insurance subsidiaries. As explained in Note 2 of the financial statements, in accordance with the approved subscriber’s agreement and service agreements, administrative services, which include costs associated with claims handling services, life insurance related operating activities, investment management, and operating overhead incurred by the Company on behalf of the Exchange and its insurance subsidiaries, are reimbursed to the Company at cost and recorded as administrative services reimbursement revenue, based on the nature of the cost or relevant utilization statistic. Auditing management’s proportional cost allocations was complex due to the multiple costs that are allocated, the extensiveness of the allocation process, and the degree of auditor judgement needed to design the nature and extent of audit procedures required to address the matter.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s proportional cost allocations process. This included, among others, testing management’s review controls over the determination of the utilization statistics and ultimate allocation of costs to the Exchange and its insurance subsidiaries. To test the Company’s proportional cost allocations, our procedures included, among others, evaluating that the costs included in the allocations are in accordance with the subscriber’s agreement and the service agreements with each of the Exchange’s insurance subsidiaries. We tested the completeness and accuracy of the costs subjected to allocation through testing the reconciliation of the costs recorded in the source systems to the costs that are allocated, testing a sample of cost allocations, and testing the reconciliation of the cost allocation output to the general ledger. We evaluated the allocation of costs to the Exchange and its insurance subsidiaries with the costs allocated in prior periods.

/s/

We have served as the Company's auditor since 2003.

February 26, 2024

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ERIE INDEMNITY COMPANY

STATEMENTS OF OPERATIONS

Years ended December 31, 2023, 2022 and 2021

(dollars in thousands, except per share data)


	2023	2022	2021
Operating revenue
Management fee revenue - policy issuance and renewal services	$	$	$
Management fee revenue - administrative services
Administrative services reimbursement revenue
Service agreement revenue
Total operating revenue

Operating expenses
Cost of operations - policy issuance and renewal services
Cost of operations - administrative services
Total operating expenses
Operating income

Investment income
Net investment income
Net realized and unrealized investment (losses) gains	()	()
Net impairment (losses) recoveries recognized in earnings	()	()
Total investment income

Interest expense, net
Other income (expense)			()
Income before income taxes
Income tax expense
Net income	$	$	$


Earnings Per Share
Net income per share
Class A common stock – basic	$	$	$
Class A common stock – diluted	$	$	$
Class B common stock – basic and diluted	$	$	$

Weighted average shares outstanding – Basic
Class A common stock
Class B common stock

Weighted average shares outstanding – Diluted
Class A common stock
Class B common stock

See accompanying notes to Financial Statements. See Note 13, "Accumulated Other Comprehensive Income (Loss)", for amounts reclassified out of accumulated other comprehensive income (loss) into the Statements of Operations.

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ERIE INDEMNITY COMPANY

STATEMENTS OF COMPREHENSIVE INCOME

Years ended December 31, 2023, 2022 and 2021

(in thousands)


	2023	2022	2021
Net income	$	$	$

Other comprehensive (loss) income, net of tax
Change in unrealized holding gains (losses) on available-for-sale securities		()	()
Pension and other postretirement plans	()
Total other comprehensive (loss) income, net of tax	()
Comprehensive income	$	$	$

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ERIE INDEMNITY COMPANY

STATEMENTS OF FINANCIAL POSITION

At December 31, 2023 and 2022

(dollars in thousands, except per share data)

2023

2022

Assets

Current assets:

Cash and cash equivalents (includes restricted cash of $ and $, respectively)

Available-for-sale securities

Receivables from Erie Insurance Exchange and affiliates, net

Prepaid expenses and other current assets

Accrued investment income

Total current assets

Available-for-sale securities, net

Equity securities

Fixed assets, net

Agent loans, net

Defined benefit pension plan

Other assets, net

Total assets

Liabilities and shareholders' equity

Current liabilities:

Commissions payable

Agent incentive compensation

Accounts payable and accrued liabilities

Dividends payable

Contract liability

Deferred executive compensation

Total current liabilities

Defined benefit pension plans

Contract liability

Deferred executive compensation

Deferred income taxes, net

Other long-term liabilities

Total liabilities

Shareholders' equity

Class A common stock, stated value $ per share; shares authorized; shares issued; shares outstanding

Class B common stock, convertible at a rate of Class A shares for one Class B share, stated value $ per share; shares authorized; shares issued and outstanding

Additional paid-in-capital

Accumulated other comprehensive loss

()

Retained earnings

Total contributed capital and retained earnings

Treasury stock, at cost; shares held

()

Deferred compensation

Total shareholders' equity

Total liabilities and shareholders' equity

See accompanying notes to Financial Statements.

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ERIE INDEMNITY COMPANY

STATEMENTS OF SHAREHOLDERS' EQUITY

Years ended December 31, 2023, 2022 and 2021

(dollars in thousands, except per share data)

Class A common stock

Class B common stock

Additional paid-in-capital

Accumulated other comprehensive (loss) income

Retained earnings

Treasury stock

Deferred compensation

Total shareholders' equity

Balance, December 31, 2020

()

Net income

Other comprehensive income

Dividends declared:

Class A $ per share

()

Class B $ per share

()

Net purchase of treasury stock (1)

Deferred compensation

()

Rabbi trust distribution (2)

()

Balance, December 31, 2021

()

Net income

Other comprehensive income

Dividends declared:

Class A $ per share

()

Class B $ per share

()

Net purchase of treasury stock (1)

()

Deferred compensation

()

Rabbi trust distribution (2)

()

Balance, December 31, 2022

()

Net income

Other comprehensive loss

()

Dividends declared:

Class A $ per share

()

Class B $ per share

()

Net purchase of treasury stock (1)

()

Deferred compensation

()

Rabbi trust distribution (2)

()

Balance, December 31, 2023

()

(1)

(2) incentive compensation deferral plan participants in 2022, and incentive compensation plan deferral plan participants in 2023 . See Note 10, "Incentive and Deferred Compensation Plans".

See accompanying notes to Financial Statements.

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ERIE INDEMNITY COMPANY

STATEMENTS OF CASH FLOWS

Years ended December 31, 2023, 2022 and 2021

(in thousands)


	2023	2022	2021
Cash flows from operating activities
Management fee received	$	$	$
Administrative services reimbursements received
Service agreement revenue received
Net investment income received
Commissions paid to agents	()	()	()
Incentive compensation paid to agents	()	()	()
Salaries and wages paid	()	()	()
Pension contribution and employee benefits paid	()	()	()
General operating expenses paid	()	()	()
Administrative services expenses paid	()	()	()
Income taxes paid	()	()	()
Interest paid		()	()
Net cash provided by operating activities

Cash flows from investing activities
Purchase of investments:
Available-for-sale securities	()	()	()
Equity securities	()	()	()
Other investments	()	()	()
Proceeds from investments:
Available-for-sale securities sales
Available-for-sale securities maturities/calls
Equity securities
Other investments
Purchase of fixed assets	()	()	()
Proceeds from disposal of fixed assets
Loans to agents and other	()	()	()
Collections on agent and other loans
Net cash used in investing activities	()	()	()

Cash flows from financing activities
Dividends paid to shareholders	()	()	()
Proceeds from short-term borrowings
Payments on short-term borrowings		()
Payments on long-term borrowings		()	()
Net cash used in financing activities	()	()	()

Net increase (decrease) in cash, cash equivalents, and restricted cash		()
Cash, cash equivalents, and restricted cash, beginning of year
Cash, cash equivalents, and restricted cash, end of year	$	$	$

Supplemental disclosure of noncash transactions
Liability incurred to purchase fixed assets	$	$	$
Operating lease assets obtained in exchange for lease liabilities	$	$	$

See accompanying notes to Financial Statements. See Note 17, "Supplementary Data on Cash Flows", for additional supplemental cash flow information.

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ERIE INDEMNITY COMPANY

NOTES TO FINANCIAL STATEMENTS

Note 1.

capacities is done in accordance with a subscriber's agreement (a limited power of attorney) executed individually by each subscriber (policyholder), which appoints Indemnity as each subscriber's attorney-in-fact to transact certain business on their behalf. In accordance with the subscriber's agreement for acting as attorney-in-fact in these capacities, we retain a management fee calculated as a percentage of the direct and affiliated assumed premiums written by the Exchange.

The policy issuance and renewal services we provide on behalf of the subscribers at the Exchange are related to the sales, underwriting and issuance of policies. The sales related services we provide include agent compensation and certain sales and advertising support services. Agent compensation includes scheduled commissions to agents based upon premiums written as well as incentive compensation, which is earned by achieving targeted measures. Agent compensation comprised approximately % of our 2023 policy issuance and renewal expenses. The underwriting services we provide include underwriting and policy processing and comprised approximately % of our 2023 policy issuance and renewal expenses. The remaining services we provide include customer service and administrative support. We also provide information technology services that support all the functions listed above that comprised approximately % of our 2023 policy issuance and renewal expenses. Included in these expenses are allocations of costs for departments that support these policy issuance and renewal functions.

Consistent with its legal structure as a reciprocal insurer, the Exchange does not have any employees or officers. Therefore, it enters into contractual relationships by and through the subscribers' attorney-in-fact. Indemnity serves as the attorney-in-fact on behalf of the subscribers at the Exchange with respect to administrative services as enumerated in the subscriber's agreement. The Exchange's insurance subsidiaries also utilize Indemnity for these services in accordance with the service agreements between each of the subsidiaries and Indemnity. Claims handling services include costs incurred in the claims process, including the adjustment, investigation, defense, recording and payment functions. Life insurance management services include costs incurred in the management and processing of life insurance business. Investment management services are related to investment trading activity, accounting and all other functions attributable to the investment of funds. Included in these expenses are allocations of costs for departments that support these administrative functions. The subscriber's agreement and service agreements provide for reimbursement of amounts incurred for these services to Indemnity. Reimbursements are settled at cost. State insurance regulations require that intercompany service agreements and any material amendments be approved in advance by the state insurance department.

Our results of operations are tied to the growth and financial condition of the Exchange. If any events occurred that impaired the Exchange’s ability to grow or sustain its financial condition, including but not limited to reduced financial strength ratings, disruption in the independent agency relationships, significant catastrophe losses, or products not meeting customer demands, the Exchange could find it more difficult to retain its existing business and attract new business. A decline in the business of the Exchange almost certainly could have as a consequence a decline in the total premiums paid and a correspondingly adverse effect on the amount of the management fees we receive. We also have an exposure to a concentration of credit risk related to the unsecured receivables due from the Exchange for net management fee and other reimbursements. See Note 15, "Concentrations of Credit Risk".

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Note 2.

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- years, buildings and building improvements are depreciated over - years, equipment is depreciated over - years, and furniture and fixtures are depreciated over years. We review long-lived assets for impairment whenever events or changes indicate that the carrying value may not be recoverable. Under these circumstances, if the fair value were less than the carrying amount of the asset, we would recognize a loss for the difference.

months, and is modeled on a monthly basis using actual underwriting results for the two prior years and current year-to-date actual results and forecasted results for the remainder of the year. Our second agent incentive compensation plan is based on an agency's underwriting profitability and uses a similar model but considers actual and forecasted results for a calendar year only. At December 31 of each year, we use actual data available and record an accrual based upon the expected payment amount. These costs are included in cost of operations - policy issuance and renewal services.

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% of all direct and affiliated assumed premiums written by the Exchange. The management fee rate is set at least annually by our Board of Directors. The management fee revenue is calculated by multiplying the management fee rate by the direct and affiliated assumed premiums written by the Exchange and is allocated between the performance obligations we have under the subscriber's agreement. The first performance obligation is to provide policy issuance and renewal services. The second performance obligation is acting as the attorney-in-fact with respect to various administrative services as enumerated in the subscriber's agreement.

Management fee revenue allocated to the policy issuance and renewal services is recognized at the time of policy issuance or renewal, because it is at the time of policy issuance or renewal when the economic benefit of the service we provide (the substantially completed policy issuance or renewal service) and the control of the promised asset (the executed insurance policy) transfers to the customer.

Management fee revenue allocated to the second performance obligation relates to us acting as the attorney-in-fact on behalf of the subscribers at the Exchange, as well as the service provider for the Exchange's insurance subsidiaries, with respect to the administrative services and is recognized over a period representing the time over which the economic benefit of the services provided (i.e. management of the administrative services) transfers to the customer.

% of the administrative services expenses were entirely attributable to the respective administrative functions (claims handling, life insurance management and investment management), while the remaining % of these expenses were allocations of costs for departments that support these administrative functions. The expenses we incur and related reimbursements we receive for administrative services are presented gross in our Statements of Operations. The subscriber's agreement and service agreements provide for reimbursement of amounts incurred for these services to Indemnity. Reimbursements are settled at cost on a monthly basis. State insurance regulations require that intercompany service agreements and any material amendments be approved in advance by the state insurance department.

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Note 3.

%, of all direct and affiliated assumed written premiums of the Exchange. We allocate a portion of our management fee revenue, currently % of the direct and affiliated assumed written premiums of the Exchange, between the performance obligations we have under the subscriber’s agreement. The first performance obligation is to provide policy issuance and renewal services to the subscribers (policyholders) at the Exchange, and the second is to act as attorney-in-fact on behalf of the subscribers at the Exchange, as well as the service provider for the Exchange's insurance subsidiaries, with respect to all administrative services.

The transaction price, including management fee revenue and administrative services reimbursement revenue, includes variable consideration and is allocated based on the estimated standalone selling prices developed using industry information and other available information for similar services. A constraining estimate of variable consideration exists related to the potential for management fees to be returned if a policy were to be cancelled mid-term. Management fees are returned to the Exchange when policyholders cancel their insurance coverage mid-term and premiums are refunded to them. The constraining estimate is determined using the expected value method, based on both historical and current information. The estimated transaction price, as reduced by the constraint, reflects consideration expected for performance of our services. We update the transaction price and the related allocation at least annually based upon the most recent information available or more frequently if there have been significant changes in any components considered in the transaction price.

The first performance obligation is to provide policy issuance and renewal services that result in executed insurance policies between the Exchange or one of its insurance subsidiaries and the subscriber (policyholder). The subscriber (policyholder) receives economic benefits when substantially all the policy issuance or renewal services are complete and an insurance policy is issued or renewed by the Exchange or one of its insurance subsidiaries. It is at the time of policy issuance or renewal that the allocated portion of revenue is recognized.

period representing the time over which these services are provided. The portion of revenue not yet earned is recorded as a contract liability in the Statements of Financial Position. For the years ended December 31, 2023, 2022, and 2021, we recognized revenue of $ million, $ million, and $ million, respectively, that was included in the contract liability balance at the beginning of the respective periods. The administrative services expenses we incur and the related reimbursements we receive are recorded gross in the Statements of Operations.

Indemnity records a receivable from the Exchange for management fee revenue when the premium is written or assumed from affiliates by the Exchange. Indemnity collects the management fee from the Exchange when the Exchange collects the premiums from the subscribers (policyholders). As the Exchange issues policies with annual terms only, cash collections generally occur within one year.

performance obligations for the years ended December 31:


(in thousands)	2023	2022	2021
Management fee revenue - policy issuance and renewal services	$	$	$

Management fee revenue - administrative services
Administrative services reimbursement revenue
Total revenue from administrative services	$	$	$

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Note 4.

to 1. See Note 12, "Capital Stock".

Class A diluted earnings per share are calculated under the if-converted method, which reflects the conversion of Class B shares to Class A shares. Diluted earnings per share calculations include the dilutive effect of assumed issuance of stock-based awards under compensation plans that have the option to be paid in stock using the treasury stock method. See Note 10, "Incentive and Deferred Compensation Plans".

$ $ $ $ $

Dilutive effect of stock-based awards

— — —

Assumed conversion of Class B shares

— — — Class A – Diluted EPS:

Income available to Class A stockholders on Class A equivalent shares

$ $ $ $ $ $

Class B – Basic EPS:

Income available to Class B stockholders

$ $ $ $ $ $

Class B – Diluted EPS:

Income available to Class B stockholders

$ $ $ $ $ $

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Note 5.

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$ $ $ Collateralized debt obligations Commercial mortgage-backed securities Residential mortgage-backed securities Other debt securities Total available-for-sale securities Equity securities:Financial services sector Utilities sector Energy sector Consumer sector Technology sector Industrial sector Communications sector Total equity securities Total$ $ $ $

December 31, 2022

(in thousands)

Total

Level 1

Level 2

Level 3

Available-for-sale securities:

Corporate debt securities

Collateralized debt obligations

Commercial mortgage-backed securities

Residential mortgage-backed securities

Other debt securities

Total available-for-sale securities

Equity securities:

Financial services sector

Utilities sector

Energy sector

Consumer sector

Communications sector

Total equity securities

Total

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$ $ $ $()$ $()$ Commercial mortgage-backed securities () () () Residential mortgage-backed securities () () () Total available-for-sale securities () () () Equity securities () Total Level 3 securities$ $()$ $ $()$ $()$

Level 3 Assets – 2022 Year-to-Date Change:

(in thousands)

Beginning balance at December 31, 2021

Included in
earnings(1)

Included
in other
comprehensive
income (loss)

Purchases

Sales

Transfers

into

Level 3(2)

Transfers

out of Level 3(2)

Ending balance at December 31, 2022

Available-for-sale securities:

Corporate debt securities

()

Commercial mortgage-backed securities

()

Residential mortgage-backed securities

()

Total available-for-sale securities

()

Equity securities

()

Total Level 3 securities

()

(1) These amounts are reported as net investment income and net realized and unrealized investment (losses) gains for each of the periods presented above.

(2) Transfers into and/or (out) of Level 3 are primarily attributable to the availability of market observable information and the re-evaluation of the observability of pricing inputs.

Financial instruments not carried at fair value

$ $ $

Other loans receivable, net (2)

(1) The discount rate used to calculate fair value at December 31, 2023 is reflective of a decrease in the BB+ financial yield curve from December 31, 2022.

(2) The current and long-term portions of other loans receivable are included in the line items "Prepaid expenses and other current assets" and "Other assets, net", respectively, in the Statements of Financial Position.

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Note 6.

$ $ $ Collateralized debt obligations Commercial mortgage-backed securities Residential mortgage-backed securities Other debt securities Total available-for-sale securities, net$ $ $ $

December 31, 2022

(in thousands)

Amortized cost

Gross unrealized gains

Gross unrealized losses

Estimated fair value

Corporate debt securities

Collateralized debt obligations

Commercial mortgage-backed securities

Residential mortgage-backed securities

Other debt securities

Total available-for-sale securities, net

$ Due after one year through five years Due after five years through ten years Due after ten years

Total available-for-sale securities, net (1)

$ $

(1) The contractual maturities of our available-for-sale securities are included in the table. However, given our intent to sell certain impaired securities, these securities are classified as current assets in our Statement of Financial Position at December 31, 2023.

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$ $ $ $ $ Collateralized debt obligations Commercial mortgage-backed securities Residential mortgage-backed securities Other debt securities Total available-for-sale securities$ $ $ $ $ $ Quality breakdown of available-for-sale securities: Investment grade$ $ $ $ $ $ Non-investment grade Total available-for-sale securities$ $ $ $ $ $

December 31, 2022

Less than 12 months

12 months or longer

Total

(dollars in thousands)

Fair
value

Unrealized losses

Fair
value

Unrealized losses

Fair
value

Unrealized losses

No. of holdings

Corporate debt securities

Collateralized debt obligations

Commercial mortgage-backed securities

Residential mortgage-backed securities

Other debt securities

Total available-for-sale securities

Quality breakdown of available-for-sale securities:

Investment grade

Non-investment grade

Total available-for-sale securities

Credit loss allowances

$ Provision and recoveries Sales/collections and write-offs()()Allowance for credit losses, end of year$ $ Other loans receivable:Allowance for credit losses, beginning of year$ $ Provision and recoveries Sales/collections and write-offs()Allowance for credit losses, end of year$ $ Agent loans:Allowance for credit losses, beginning of year$ $ Provision and recoveriesSales/collections and write-offsAllowance for credit losses, end of year$ $

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$ $ Equity securities

Limited partnerships (1)

()() Cash equivalents and other Total investment income Less: investment expenses Net investment income$ $ $

(1) Limited partnership losses include both realized gains (losses) and unrealized valuation changes. Our limited partnership investments are included in the line item "Other assets" in the Statements of Financial Position. We have made no new significant limited partnership commitments since 2006, and the balance of limited partnership investments is expected to decline over time as additional distributions are received.

Net realized and unrealized investment (losses) gains

$ $ Gross realized losses()()()Net realized (losses) gains on available-for-sale securities()() Equity securities ()()Miscellaneous Net realized and unrealized investment (losses) gains$()$()$

The portion of net unrealized gains (losses) recognized during the reporting period related to equity securities held at the reporting date is calculated as follows for the years ended December 31:



(in thousands)	2023	2022		2021
Equity securities:
Net gains (losses) recognized during the period	$	$	()	$	()
Less: net losses recognized on securities sold	()	()		()
Net unrealized gains (losses) recognized on securities held at reporting date	$	$	()	$	()

Net impairment (losses) recoveries recognized in earnings

)$()$()Credit (impaired) recovered()() Total available-for-sale securities()() Agent loans - expected credit recoveries Other loans receivable - expected credit losses()Net impairment (losses) recoveries recognized in earnings$()$()$

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Note 7.

$ Land, buildings, and building improvements Equipment Furniture and fixtures Leasehold improvements

Construction in progress (1)

Projects in progress (1)

Total fixed assets, gross Less: Accumulated depreciation and amortization()()Fixed assets, net$ $

(1) 2022 amounts have been reclassified to conform to the current period presentation.

Construction in progress includes ongoing renovations to an office building that is part of our principal headquarters and not yet subject to depreciation. The building renovation is expected to be completed in phases, starting in 2025, with full completion expected in 2027.

Projects in progress include certain computer software and software development costs for internal use that are not yet subject to amortization.

Depreciation and amortization expense totaled $ million, $ million and $ million for the years ended December 31, 2023, 2022 and 2021, respectively, and is included in cost of operations - policy issuance and renewal services. Accumulated depreciation and amortization decreased due to disposals of fully depreciated assets, primarily software, partially offset by current year depreciation and amortization expense.

Note 8.

million bank revolving line of credit with a $ million letter of credit sublimit that expires on October 29, 2026. As of December 31, 2023, a total of $ million remains available under the facility due to $ million outstanding letters of credit, which reduce the availability for letters of credit to $ million. We had borrowings outstanding on our line of credit as of December 31, 2023. Investments with a fair value of $ million were pledged as collateral on the line of credit at December 31, 2023. These investments have no trading restrictions and are reported as available-for-sale securities and cash and cash equivalents on our Statement of Financial Position as of December 31, 2023. The bank requires compliance with certain covenants, which include leverage ratios and debt restrictions. We are in compliance with all covenants at December 31, 2023.

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Note 9.

% of the annual defined benefit pension income, and the Exchange and its subsidiaries reimbursed us for approximately % of the annual SERP cost. For our funded pension plan, amounts are settled in cash for the portion of pension (income) cost allocated to the Exchange and its subsidiaries. For our unfunded SERP, we pay the obligations when due and amounts are settled in cash between entities when there is a payout.

Pension plan (income) cost

$ $ Interest cost on benefit obligation Expected return on plan assets()()()Prior service cost amortization Net actuarial (gain) loss amortization()

Pension plan (income) cost (1)

$()$ $

(1) Pension plan (income) cost represents total plan (income) cost before reimbursements between Indemnity and the Exchange and its subsidiaries. The components of pension plan (income) cost other than the service cost components are included in the line item "Other income (expense)" in the Statements of Operations, net of reimbursements between Indemnity and the Exchange and its subsidiaries.

Actuarial assumptions

% %Expected return on assets

Rate of compensation increase (1)

SERP:Discount rate % %Rate of compensation increase

(1) The rate of compensation increase for the employee plan is age-graded. An equivalent single compensation increase rate of % in 2023 and % in 2022 would produce similar results.

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% % %Expected return on assets

Rate of compensation increase (1)

SERP:Discount rate % % %Rate of compensation increase

(1) The rate of compensation increase for the employee plan is age-graded. An equivalent single compensation increase rate of % in 2023 and % in 2022 and 2021 would produce similar results.

The economic assumptions that have the most impact on the postretirement benefits expense are the discount rate and the long-term rate of return on plan assets. The discount rate assumption used to determine the benefit obligation for all periods presented was based upon a yield curve developed from corporate bond yield information.

The pension plan's expected long-term rate of return represents the average rate of return to be earned on plan assets over the period the benefits included in the benefit obligation are to be paid. To determine the expected long-term rate of return assumption, we utilized models based upon historical analysis and forward-looking views of the financial markets based upon key factors such as historical returns for the asset class' applicable indices, the correlations of the asset classes under various market conditions and consensus views on future real economic growth and inflation. The expected future return for each asset class is then combined by considering correlations between asset classes and the volatilities of each asset class to produce a reasonable range of asset return results within which our expected long-term rate of return assumption falls.

Funding policy/funded status

Our defined benefit pension plan funding policy is generally to contribute an amount equal to the greater of the target normal cost for the plan year, or the amount necessary to fund the plan to %. Accordingly, we made a $ million contribution during 2022 and a $ million contribution during 2023. We also made a contribution of $ million in January 2024. The 2023 contribution generated a net benefit asset of $ million and is presented separately from the unfunded plan as a non-current asset on the Statement of Financial Position at December 31, 2023.

$()Pension asset$ $

Pension liabilities – due within one year (1)

()()Pension liabilities – due after one year()()Net amount recognized$ $()

(1) The current portion of pension liabilities for the unfunded plan is included in accounts payable and accrued liabilities.

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$ Service cost for benefits earned Interest cost on benefit obligation Plan amendments Actuarial loss (gain) ()Benefits paid()()Projected benefit obligation, end of year$ $ Accumulated benefit obligation, end of year$ $

Projected benefit obligations increased $ million at December 31, 2023 compared to December 31, 2022 primarily due to the lower discount rate used to measure the future benefit obligations. The discount rate for the employee pension plan decreased to % in 2023 from % in 2022.

$ Plan assets

At December 31, 2023, the SERP had a projected benefit obligation in excess of plan assets. At December 31, 2022, both the defined benefit pension plan and the SERP had projected benefit obligations in excess of plan assets.

$ Plan assets

Plan assets

$ Actual return on plan assets ()Employer contributions Benefits paid()()Fair value of plan assets, end of year$ $

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)$()Prior service cost Net amount not yet recognized$()$()

Other comprehensive loss (income)

$()$()Amortization of net actuarial gain (loss) ()()Amortization of prior service cost()()()

Plan amendments (1)

Total recognized in other comprehensive loss (income)$ $()$()

(1) Plan amendments relate to new SERP participants.

Asset allocation

The employee pension plan utilizes a return seeking and a liability asset matching allocation strategy. It is based upon the understanding that 1) equity investments are expected to outperform debt investments over the long-term, 2) the potential volatility of short-term returns from equities is acceptable in exchange for the larger expected long-term returns, and 3) a portfolio structured across investment styles and markets (both domestic and foreign) reduces volatility. As a result, the employee pension plan's investment portfolio utilizes a broadly diversified asset allocation across domestic and foreign equity and debt markets. The investment portfolio is composed of commingled pools, an exchange traded fund, and a separate account that are dedicated exclusively to the management of employee benefit plan assets.

% % %(1) %Non-U.S. equity securities (2) Total equity securities Debt securities (3) Other (4) Total % % % %

(1) U.S. equity securities – % seek to achieve excess returns relative to the Russell 3000 Index.

(2) Non-U.S. equity securities – % are allocated to international small cap investments, while another % are allocated to international emerging market investments. The remaining % of the Non-U.S. equity securities are allocated to investments seeking to achieve excess returns relative to an international market index.

(3) Debt securities – % are allocated to long U.S. Treasury Strips, % are allocated to U.S. corporate bonds with an emphasis on long duration bonds rated A or better.

(4) Institutional money market fund.

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$ $ $ $ Non-U.S. equity securities Total equity securities Debt securities Other Total$ $ $ $ $

December 31, 2022

(in thousands)

Total

Level 1
Fair Value

Level 2
Fair Value

Level 3
Fair Value

Net Asset
Value (NAV)

Equity securities:

U.S. equity securities

Non-U.S. equity securities

Total equity securities

Debt securities

Other

Total

Estimates of fair values of the pension plan assets are obtained primarily from the trustee and custodian of our pension plan. Our Level 1 category includes a money market mutual fund, an exchange traded fund, and a separate account for which the fair value is determined using an exchange traded price provided by the trustee and custodian. Commingled pools are valued based on NAV per share or unit as a practical expedient as reported by the fund manager, multiplied by the number of shares or units held as of the measurement date. Accordingly, these NAV-based investments have been excluded from the fair value hierarchy. These investments have minimal redemption notice periods and are redeemable daily at the NAV, less transaction fees, without significant restrictions. There are no significant unfunded commitments related to these investments.

Estimated future benefit payments

2025 2026 2027 2028 2029 - 2033

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% of the participant contributions up to % of compensation and % of participant contributions over % and up to % of compensation. Matching contributions paid to the plan were $ million in 2023, $ million in 2022, and $ million in 2021. The Exchange and its subsidiaries reimbursed us for approximately % of the matching contributions. Employees are permitted to invest the employer-matching contributions in our Class A common stock. Employees, other than executive and senior officers, may sell the shares at any time without restriction, provided they are in compliance with applicable insider trading laws; sales by executive and senior officers are subject to additional pre-clearance restrictions imposed by our insider trading policies. The plan acquires shares in the open market necessary to meet the obligations of the plan. Plan participants held million shares of our Class A common stock at December 31, 2023 and 2022.

Note 10.

incentive plans and deferred compensation plans for our executives, senior vice presidents and other selected officers, and deferred compensation plans for our outside directors. Executives, senior vice presidents and other selected officers and key employees are also eligible to receive awards under an equity compensation plan, subject to the discretion of the Executive Compensation and Development Committee of our Board of Directors ("ECDC") or the chief executive officer.

Annual incentive plan

Our annual incentive plan ("AIP") is a bonus plan that pays cash to our executives, senior vice presidents and other selected officers annually. Participants can elect to defer up to % of the award under either the deferred compensation plan or the incentive compensation deferral plan. If the funding qualifier is met, plan participants are eligible to receive the incentive based upon attainment of corporate and individual performance measures, which can include various financial measures. The measures are established at the beginning of each year by the ECDC, with ultimate approval by the full Board of Directors. The corporate performance measures included the reported growth in direct written premium and policies in force, and statutory combined ratio of the Exchange and its property and casualty subsidiaries for all periods presented.

Long-term incentive plan

Our long-term incentive plan ("LTIP") is a performance based incentive plan designed to reward executives, senior vice presidents and other selected officers who can have a significant impact on our long-term performance, and to further align the interests of such employees with those of our shareholders. The LTIP permits grants of performance shares or units, or phantom shares, to be satisfied with shares of our Class A common stock or cash payment as determined by the ECDC. Participants can elect to defer up to % of the award under the incentive compensation deferral plan. The ECDC determines the form of the award to be granted at the beginning of each performance period, which is generally a period. The number of shares of our common stock authorized for grant under the LTIP is million shares. We repurchase our Class A common stock on the open market to settle stock awards under the plan. We do not issue new shares of common stock to settle stock awards. LTIP awards are considered vested at the end of each applicable performance period.

The LTIP provides the recipient the right to earn performance shares or units, or phantom stock, based on the level of achievement of performance goals as defined by us. Performance measures and a peer group of property and casualty companies to be used for comparison are determined by the ECDC. The performance measures for all periods presented were the reported growth in direct written premium and statutory combined ratio of the Exchange and its property and casualty subsidiaries and return on invested assets over a performance period as compared to the results of the peer group over the same period. Because the award is based upon a comparison to results of a peer group over a period, the award accrual is based upon estimates of probable results for the remaining performance period. This estimate is subject to variability if our results or the results of the peer group are substantially different than the results we project.

The fair value of LTIP awards is measured at each reporting date at the current share price of our Class A common stock. A liability is recorded and compensation expense is recognized ratably over the performance period.

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million. At December 31, 2022, the fully vested plan awards for the 2020-2022 performance period totaled $ million and were awarded to participants in June 2023. At December 31, 2021, the fully vested plan awards for the 2019-2021 performance period totaled $ million and were awarded to participants in June 2022. At December 31, 2020, the fully vested plan awards for the 2018-2020 performance period totaled $ million and were awarded to participants in June 2021. The ECDC has determined that the plan awards for the 2022-2024 and 2023-2025 performance periods will be paid in cash.

The Exchange and its subsidiaries reimburse us for compensation costs of employees performing administrative services. Earned compensation costs are allocated to these entities and reimbursed to us in cash once the payout is made. The total compensation cost charged to operations related to these LTIP awards, net of forfeitures, was $ million in 2023, $ million in 2022, and $ million in 2021. The related tax benefits recognized in income were $ million in 2023, $ million in 2022, and $ million in 2021. In 2023, the Exchange and its subsidiaries reimbursed us for approximately % of the annual compensation cost of these plans. At December 31, 2023, there was $ million of total unrecognized compensation cost for non-vested LTIP awards related to open performance periods. Unrecognized compensation is expected to be recognized over a period of .

Deferred compensation plan

Our deferred compensation plan allows executives, senior vice presidents and other selected officers to elect to defer receipt of a portion of their compensation and AIP cash awards until a later date. Employer 401(k) matching contributions that are in excess of the annual contribution or compensation limits are also credited to the participant accounts for those who elected to defer receipt of some portion of their base salary. Participants select hypothetical investment funds for their deferrals, which are credited with the hypothetical returns generated.

Incentive compensation deferral plan

We have an unfunded, non-qualified incentive compensation deferral plan for participants of the AIP and LTIP. Participants can elect to defer up to % of their annual AIP award and/or up to % of their LTIP award for each performance period. Deferred awards will be credited to a deferred stock account as credits denominated in shares of our Class A common stock until retirement or other separation from service. Participants are % vested at date of deferral. The shares are then held in a rabbi trust, which was established to hold the shares earned under both the incentive compensation deferral plan and the deferred stock compensation plan for outside directors. The rabbi trust is classified and accounted for as equity in a manner consistent with the accounting for treasury stock. Dividends received on the shares in the rabbi trust are used to purchase additional shares. Vested share credits will be paid to participants from the rabbi trust upon separation from service in approximate equal annual installments of Class A shares for a period of . In 2023, the rabbi trust purchased shares of our common stock in the open market at an average price of $ for $ million to satisfy the liability for the 2022 AIP and 2020-2022 LTIP performance period awards deferred under the incentive compensation deferral plan, and dividend equivalent credits on rabbi trust shares. In 2022, the rabbi trust purchased shares of our common stock in the open market at an average price of $ for $ million to satisfy the liability for the 2021 AIP and 2019-2021 LTIP performance period awards deferred under the incentive compensation deferral plan, and dividend equivalent credits on rabbi trust shares. In 2021, the rabbi trust purchased shares of our common stock in the open market at an average price of $ for $ million to satisfy the liability for the 2020 AIP and 2018-2020 LTIP performance period awards deferred under the incentive compensation deferral plan, and dividend equivalent credits on rabbi trust shares.

Deferred compensation plans for outside directors

We have a deferred compensation plan for our outside directors that allows participants to defer receipt of a portion of their annual compensation until a later date. Participants select hypothetical investment funds for their deferrals, which are credited with the hypothetical returns generated.

We also have a deferred stock compensation plan for our outside directors to further align the interests of directors with those of our shareholders that provides for payment of a portion of the directors' annual compensation in shares of our Class A common stock. Each director vests in the grant % every over the course of a year. Dividends paid by us are credited to each director's account and vest immediately. We do not issue new shares of common stock to directors. We repurchase shares of our Class A common stock in the open market to satisfy these awards, which are then held in the rabbi trust. Effective April 25, 2023, the plan was amended to include a maximum of shares that may be issued under the plan, and to stipulate that no shares may be credited later than from the date our shareholders last approved the plan.

The rabbi trust purchased shares of our common stock on the open market at an average price of $ for $ million in 2023, shares at an average price of $ for $ million in 2022, and shares at an average price of $

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million in 2021 to satisfy the liability of the stock compensation plan for outside directors, and dividend equivalent credits on rabbi trust shares. The shares are distributed to the outside director from the rabbi trust upon ending board service. Director compensation charged to operations related to these awards totaled $ million in 2023 and $ million in both 2022 and 2021.

$ $ Annual incentive plan awards Long-term incentive plan awards Employer match and hypothetical earnings on deferred compensation Total plan awards and earnings Total plan awards paid()()()Compensation deferred Distributions from the deferred compensation plans()()()

Forfeitures (1)

()Funding of rabbi trust for deferred stock compensation plan for outside directors()()()

Funding of rabbi trust for incentive compensation deferral plan (2)

()()()Deferred executive compensation, end of the year$ $ $

(1) Forfeitures are the result of plan participants who separated from service and are recognized in the year they occur.

(2) In 2023 and 2022, funding includes $ million and $ million, respectively, representing shares held back to satisfy tax withholding on rabbi trust distributions that reduced funding requirements for performance award deferrals.

Equity compensation plan

Our equity compensation plan ("ECP") is designed to reward executives, senior vice presidents and other selected officers and key employees who can have a significant impact on our long-term performance, and to further align the interests of such employees with those of our shareholders. The ECP permits grants of restricted shares, restricted share units and other share based awards, to be satisfied with shares of our Class A common stock or cash. The ECDC determines the form of the award to be granted at the beginning of each performance period. The number of shares of our Class A common stock authorized for grant under the ECP is shares, with no one person able to receive more than shares in a calendar year. We do not issue new shares of common stock to satisfy plan awards. Share awards are settled through the repurchase of our Class A common stock on the open market. Restricted share awards may be entitled to receive dividends payable during the performance period, or, if subject to performance goals, to receive dividend equivalents payable upon vesting. Dividend equivalents may provide for the crediting of interest or hypothetical investment experience, payable after expiration of the performance period. Vesting conditions are determined at the time the award is granted and may include continuation of employment for a specific period, satisfaction of performance goals within a defined performance period, and the satisfaction of any other terms and conditions as determined to be appropriate. The ECP expires December 31, 2031, unless earlier amended or terminated by our Board of Directors.

To date, all awards have been satisfied with shares of our Class A common stock. In 2023, we purchased Class A shares with an average share price of $ and a market value of $ million to satisfy the liability for the 2020 plan year. In 2022, we purchased Class A shares with an average share price of $ and a market value of $ million to satisfy the liability for the 2019 plan year. In 2021, we purchased shares with an average share price of $ and a market value of $ million to satisfy the liability for the 2018 plan year. The total compensation charged to operations related to ECP awards was $ million in 2023, $ million in 2022, and $ million in 2021. The increases in 2023 and 2022 compared to the respective prior periods resulted from increases in plan participants and our stock price. The Exchange and its subsidiaries reimburse us for earned compensation costs of employees performing administrative services, which can fluctuate each year based on the plan participants. The Exchange and its subsidiaries reimbursed us for approximately %, %, and % of the awards paid in 2023, 2022, and 2021 respectively. Unearned compensation expense of $ million is expected to be recognized over a period of .

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Note 11.

$ $ Deferred income tax (benefit) expense() ()Income tax expense$ $ $

$ $ Other, net()()()Income tax expense$ $ $

$ Unrealized losses on investments Deferred revenue Allowance for management fee returned on cancelled policies

Current expected credit loss allowance (1)

Other (1)

Total deferred tax assets Deferred tax liabilities:Depreciation Pension and other postretirement benefits Prepaid expenses Other Total deferred tax liabilities Net deferred tax liability$()$()

(1) 2022 amounts have been reclassified to conform to the current period presentation.

If we determine that any of our deferred tax assets will not result in future tax benefits, a valuation allowance must be established for the portion of the assets that are not expected to be realized. We had valuation allowance recorded at December 31, 2023 or 2022.

We do not have any unrecognized tax benefit that, if recognized, would affect our effective tax rate as of December 31, 2023 and 2022. Any interest expense related to uncertain tax positions would be recognized in income tax expense.

Tax years ending December 31, 2022, 2021 and 2020 remain open to IRS examination. We are not currently under IRS audit, nor have we been notified of an upcoming IRS audit.

We are the attorney-in-fact for the subscribers (policyholders) at the Exchange, a reciprocal insurance exchange. In that capacity, we provide all services and facilities necessary to conduct the Exchange's insurance business. Indemnity and the Exchange together constitute a single insurance business. Consequently, we are not subject to state corporate income or franchise taxes in states where the Exchange conducts its business and the states collect premium tax in lieu of corporate income or franchise tax, as a result of the Exchange's remittance of premium taxes in those states.

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Note 12.

classes of common stock: Class A, which has a dividend preference, and Class B, which has voting power and a conversion right. Each share of Class A common stock outstanding at the time of the declaration of any dividend upon shares of Class B common stock shall be entitled to a dividend payable at the same time, at the same record date, and in an amount at least equal to 2/3 of 1.0% of any dividend declared on each share of Class B common stock. We may declare and pay a dividend in respect to Class A common stock without any requirement that any dividend be declared and paid in respect to Class B common stock. Sole shareholder voting power is vested in Class B common stock except insofar as any applicable law shall permit Class A common shareholders to vote as a class in regards to any changes in the rights, preferences, and privileges attaching to Class A common stock. Holders of Class B shares may, at their option, convert their shares into Class A shares at the rate of Class A shares per Class B share. There were shares of Class B common stock converted into Class A common stock in 2023, 2022 or 2021.

Stock repurchases

Our Board of Directors authorized a stock repurchase program effective January 1, 1999 allowing the repurchase of our outstanding Class A nonvoting common stock. In 2011, our Board of Directors approved a continuation of the current stock repurchase program for a total of $ million, with no time limitation. Treasury shares are recorded in the Statements of Financial Position at total cost based upon trade date. There were shares repurchased under this program during 2023, 2022 or 2021. We had approximately $ million of repurchase authority remaining under this program at December 31, 2023, based upon trade date.

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Note 13.

)$()$()$ $ $ $ $ $ OCI (loss) before reclassifications ()()()()()()Realized investment losses (gains) ()()()Impairment losses (recoveries) ()()()OCI (loss) ()()()()()()AOCI (loss), end of year$()$()$()$()$()$()$ $ $ Pension and other postretirement plans:AOCI (loss), beginning of year$ $ $ $()$()$()$()$()$()OCI (loss) before reclassifications()()()

Amortization of prior service costs (1)

Amortization of net actuarial (gain) loss (1)

()()() OCI (loss)()()() AOCI (loss), end of year$ $ $ $ $ $ $()$()$()TotalAOCI (loss), beginning of year$()$()$()$()$()$()$()$()$()Investment securities ()()()()()()Pension and other postretirement plans()()() OCI (loss)()()() AOCI (loss), end of year$()$()$()$()$()$()$()$()$()

(1)These components of AOCI (loss) are included in the computation of net periodic pension (income) cost. See Note 9, "Postretirement Benefits", for additional information.

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Note 14.

%. The management fee rate charged the Exchange was % in 2023, 2022 and 2021. The Board of Directors elected to maintain the fee at % beginning January 1, 2024.

There is no provision in the subscriber's agreement for termination of our appointment as attorney-in-fact by the subscribers at the Exchange and the appointment is not affected by a policyholder's disability or incapacity.

Insurance holding company system

Most states have enacted legislation that regulates insurance holding company systems, defined as or more affiliated persons, or more of which is an insurer. The Exchange has the following wholly owned property and casualty subsidiaries: Erie Insurance Company, Erie Insurance Company of New York, Erie Insurance Property & Casualty Company and Flagship City Insurance Company, and a wholly owned life insurance company, Erie Family Life Insurance Company. Indemnity and the Exchange, and its wholly owned subsidiaries, meet the definition of an insurance holding company system.

Shared facilities

We leased the home office from the Exchange until December 31, 2021, at which time we purchased the home office properties from the Exchange at the appraised value of $ million to align the ownership interest of these facilities with the functions being performed at the home office campus, which are mainly Indemnity's management operations. Lease expense totaled $ million in 2021. Operating expenses, including utilities, cleaning, repairs, real estate taxes, property insurance, and leasehold improvements totaled $ million in 2021. The Exchange and its subsidiaries reimbursed us for rent costs and related operating expenses of shared facilities used to perform administrative services, which are allocated based upon square footage occupied. Reimbursements related to the use of this space totaled $ million in 2021.

Effective July 1, 2021, the Exchange and its subsidiaries entered into a service agreement with Indemnity to use space in Indemnity-owned properties. The home office was added to this agreement effective January 1, 2022. The amount charged is based on rental rates of like property in Erie, Pennsylvania and the square footage occupied. Income earned from the Exchange and its subsidiaries for the use of space totaled $ million, $ million and $ million in 2023, 2022, and 2021, respectively. Operating expenses for Indemnity-owned properties under this service agreement include utilities, cleaning, repairs, real estate taxes, property insurance, and leasehold improvements. These expenses totaled $ million, $ million, and $ million in 2023, 2022, and 2021, respectively. The Exchange and its subsidiaries reimbursed us for operating expenses of shared facilities used to perform administrative services, which are allocated based upon square footage occupied. Reimbursements related to the use of this space totaled $ million, $ million, and $ million in 2023, 2022, and 2021, respectively.

Other loans receivable

In December 2023, we issued senior secured loans totaling $ million to fund a real estate development project supporting revitalization efforts in our community. Ownership in the project consists of related party investors, including affiliate entities and two Indemnity directors, as well as other unrelated investors. The loans, net of current expected credit loss allowances, are reported in "Other assets" in our Statement of Financial Position, with changes in credit loss allowances totaling $ million reported in "Net impairment (losses) recoveries recognized in earnings" in our Statement of Operations.

The first loan issued for $ million accrues paid-in-kind interest at a fixed rate of % and matures December 15, 2027, with both principal and accrued interest due at maturity. The second loan issued for $ million accrues paid-in-kind interest at a fixed rate of % and matures December 15, 2033, with both principal and accrued interest due at maturity.

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Note 15.

million and $ million at December 31, 2023 and 2022, respectively, which includes a current expected credit loss allowance of $ million in both periods.

Note 16.

million. We have committed to fund a minimum of % of each loan executed through this program. As of December 31, 2023, loans executed under this agreement totaled $ million, of which our portion of the loans is $ million. Additionally, we have agreed to guarantee a portion of the funding provided by the other participants in the program in the event of default. As of December 31, 2023, our maximum potential amount of future payments on the guaranteed portion is $ million. All loan payments under the participation program are current as of December 31, 2023.

We also have contingent obligations for guarantees related to certain real estate development projects supporting revitalization efforts in our community. As of December 31, 2023, our maximum potential obligation related to the guarantees is $ million.

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Note 17.

$ $ Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization Deferred income tax (benefit) expense() ()Lease amortization expense Losses (gains) and impairment losses (recoveries) on investments ()Loss (gain) on disposal of fixed assets ()Net investment loss (income) ()Increase (decrease) in deferred compensation ()()(Increase) decrease in receivables from affiliates()() Increase in accrued investment income()()()Increase in pension asset() Increase in pension liability Decrease (increase) in prepaid expenses and other assets () Increase (decrease) in accounts payable and accrued expenses ()Increase in commissions payable (Decrease) increase in accrued agent incentive compensation()() Increase (decrease) in contract liability ()Net cash provided by operating activities$ $ $

Note 18.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosures.

As required by the Securities and Exchange Commission Rule 13a-15(e), we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2023. Based upon the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There has been no change in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect our internal controls over financial reporting. Our process for evaluating controls and procedures is continuous and encompasses constant improvement of the design and effectiveness of established controls and procedures.

Management's Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting of Erie Indemnity Company, as defined in Rules 13a-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the Erie Indemnity Company's internal control over financial reporting based upon the framework in the Internal Control-Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon our evaluation under the framework in the Internal Control-Integrated Framework issued in 2013, management has concluded that Erie Indemnity Company's internal control over financial reporting was effective as of December 31, 2023.

/s/ Timothy G. NeCastro

/s/ Julie M. Pelkowski

/s/ Jorie L. Novacek

Timothy G. NeCastro

Julie M. Pelkowski

Jorie L. Novacek

President and

Executive Vice President

Senior Vice President

Chief Executive Officer

and Chief Financial Officer

and Controller

February 26, 2024

Our independent auditor, Ernst & Young LLP, a registered public accounting firm, has issued an attestation report on our internal control over financial reporting. This report appears on the following page.

ITEM 9B. OTHER INFORMATION

There was no additional information in the fourth quarter of 2023 that has not already been filed in a Form 8-K.

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Erie Indemnity Company

Opinion on Internal Control Over Financial Reporting

We have audited Erie Indemnity Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Erie Indemnity Company (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the statements of financial position of the Company as of December 31, 2023 and 2022, the related statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and our report dated February 26, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Indianapolis, Indiana

February 26, 2024

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information with respect to our outside directors, audit committee and audit committee financial experts, Section 16(a) beneficial ownership reporting compliance, and insider trading policy is incorporated herein by reference to the information statement on Schedule 14C to be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2023.

We have adopted a Code of Conduct that applies to all of our outside directors, officers and employees. We have previously filed a copy of the Code of Conduct as Exhibit 14.1 to the Registrant's Form 8-K filed with the Securities and Exchange Commission on October 26, 2023. In addition to this, we have adopted a Code of Ethics for Senior Financial Officers that also applies to our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and any other person performing similar functions. We have previously filed a copy of the Code of Ethics for Senior Financial Officers as Exhibit 14.4 to the Registrant's Form 8-K filed with the Securities and Exchange Commission on June 1, 2016. Our Code of Conduct and Code of Ethics for Senior Financial Officers are also available on our website at www.erieinsurance.com.

Executive Officers of the Registrant

Name

Age as of 12/31/2023

Principal Occupation and Positions for Past Five Years

President & Chief Executive Officer:

Timothy G. NeCastro

President and Chief Executive Officer of the Company since August 2016; Director, Erie Family Life Insurance Company ("EFL"), Erie Insurance Company ("EIC"), Flagship City Insurance Company ("Flagship"), Erie Insurance Company of New York ("ENY") and Erie Insurance Property & Casualty Company ("EPC").

Executive Vice Presidents:

Brian W. Bolash

Executive Vice President, Secretary and General Counsel since January 2022; Senior Vice President, Secretary and General Counsel, October 2018 through December 2021; Senior Counsel and Corporate Secretary, January 2016 through September 2018; Director, EFL, EIC, Flagship, ENY and EPC.

Sean D. Dugan

Executive Vice President, Human Resources and Corporate Services since January 2023; Senior Vice President, Human Resources, March 2020 through December 2022; Corporate Human Resources Officer, October 2018 through March 2020; Director, EFL, EIC, Flagship, ENY and EPC.

Lorianne Feltz

Executive Vice President, Claims & Customer Service since November 2016.

Julie M. Pelkowski

Executive Vice President and Chief Financial Officer since May 2023; Senior Vice President, Enterprise Office, March 2022 through April 2023; Senior Vice President and Controller, August 2016 through February 2022; Director, EFL, EIC, Flagship, ENY and EPC.

Douglas E. Smith

Executive Vice President, Sales & Products since November 2016.

Parthasarathy Srinivasa

Executive Vice President and Chief Information Officer since joining the Company in April 2022. Prior to joining the Company: Senior Vice President and Chief Data and Insurance Information Officer Verisk Analytics, 2019 through April 2022; Chief Information and Operations Officer Safe Auto Insurance (now Allstate Corporation), 2016 through 2019.

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ITEM 11. EXECUTIVE COMPENSATION

The information required by this item with respect to executive compensation is incorporated by reference to the information statement on Schedule 14C to be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2023.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information with respect to security ownership of certain beneficial owners and management and securities authorized for issuance under equity compensation plans, is incorporated by reference to the information statement on Schedule 14C to be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2023.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information with respect to certain relationships with our outside directors is incorporated by reference to the information statement on Schedule 14C to be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2023.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated by reference to the information statement on Schedule 14C to be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2023.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this report:

1. Financial Statements

Included in Part II, Item 8. "Financial Statements and Supplementary Data" contained in this report.

Erie Indemnity Company:

•Report of Independent Registered Public Accounting Firm on the Effectiveness of Internal Control over Financial Reporting

•Report of Independent Registered Public Accounting Firm on the Financial Statements

•Statements of Operations for the three years ended December 31, 2023, 2022 and 2021

•Statements of Comprehensive Income for the three years ended December 31, 2023, 2022 and 2021

•Statements of Financial Position as of December 31, 2023 and 2022

•Statements of Shareholders' Equity for the three years ended December 31, 2023, 2022 and 2021

•Statements of Cash Flows for the three years ended December 31, 2023, 2022 and 2021

•Notes to Financial Statements

2. Financial Statement Schedules

All schedules are not required, not applicable, or the information is included in the financial statements or notes thereto.


			Page
3. Exhibit Index			78

ITEM 16. FORM 10-K SUMMARY

None.

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EXHIBIT INDEX

(Pursuant to Item 601 of Regulation S-K)


Exhibit
Number						Description of Exhibit

3.1						Amended and Restated Articles of Incorporation of Registrant dated April 19, 2011. Such exhibit is incorporated by reference to Exhibit No. 3.1 to the Registrant’s Form 10-Q that was filed with the Commission on August 2, 2011.

3.2						Erie Indemnity Company Amended and Restated Bylaws dated April 30, 2019. Such exhibit is incorporated by reference to Exhibit 3.10 to the Registrant's Form 8-K that was filed with the Commission on May 3, 2019.

4.1						Erie Indemnity Company Description of Capital Stock. Such exhibit is incorporated by reference to Exhibit 4.1 to the Registrant’s Form 10-K that was filed with the Commission on February 25, 2021.

10.1						Form of Subscriber’s Agreement whereby policyholders of Erie Insurance Exchange appoint Registrant as their Attorney-in-Fact. Such exhibit is incorporated by reference to Exhibit 10.12 to the Registrant’s Form 10-Q that was filed with the Commission on November 6, 2002.

10.2						Services Agreement between Erie Indemnity Company and Erie Family Life Insurance Company effective March 31, 2011. Such exhibit is incorporated by reference to Exhibit 99.1 to the Registrant’s Form 8-K that was filed with the Commission on March 31, 2011.

10.3						Form of Indemnification Agreement by and between Erie Indemnity Company and each Director and Executive Officer of Erie Indemnity Company. Such exhibit is incorporated by reference to Exhibit 10.108 to the Registrant’s Form 10-K that was filed with the Commission on February 26, 2009.

10.4*						Erie Indemnity Company Annual Incentive Plan effective January 1, 2020. Such exhibit is incorporated by reference to Exhibit 10.204 to the Registrant's Form 10-K that was filed with the Commission on February 27, 2020.

10.5*						Erie Indemnity Company Long-Term Incentive Plan (Effective as of January 1, 2020). Such exhibit is incorporated by reference to Appendix A to the Registrant's Information Statement for the 2020 Annual Meeting of Shareholders filed with the Commission on March 20, 2020.

10.6*						Erie Indemnity Company Equity Compensation Plan (As Amended and Restated April 26, 2022), dated June 28, 2022. Such exhibit is incorporated by reference to Exhibit 10.2 to the Registrant's Form 10-Q that was filed with the Commission on July 28, 2022.

10.7						Appointment of Administrator to Deferred Compensation Plan of Erie Indemnity Company, Erie Indemnity Company Incentive Compensation Deferral Plan, and Supplemental Retirement Plan for Certain Members of the Erie Insurance Group Retirement Plan for Employees, dated December 21, 2021. Such exhibit is incorporated by reference to Exhibit 10.224 to the Registrant's Form 10-K that was filed with the Commission on February 24, 2022.

10.8*						Deferred Compensation Plan of Erie Indemnity Company (As Amended and Restated as of January 1, 2009). Such exhibit is incorporated by reference to Exhibit 10.104 to the Registrant’s Form 10-K that was filed with the Commission on February 26, 2009.

10.9*						Appendix B to Deferred Compensation Plan of Erie Indemnity Company (As Amended and Restated Effective as of January 1, 2019). Such exhibit is incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q that was filed with the Commission on July 25, 2019.

10.10*						Second Amendment to Appendix B to Deferred Compensation Plan of Erie Indemnity Company (As Amended and Restated Effective as of January 1, 2009), dated December 24, 2020. Such exhibit is incorporated by reference to Exhibit 10.209 to the Registrant’s Form 10-K that was filed with the Commission on February 25, 2021.

10.11*						Third Amendment to Deferred Compensation Plan of Erie Indemnity Company (As Amended and Restated as of January 1, 2009), dated December 21, 2021. Such exhibit is incorporated by reference to Exhibit 10.223 to the Registrant's Form 10-K that was filed with the Commission on February 24, 2022.

10.12*						Post-2021 Deferred Compensation Plan of the Erie Indemnity Company, effective January 1, 2022, dated December 9, 2021. Such exhibit is incorporated by reference to Exhibit 10.218 to the Registrant's Form 10-K that was filed with the Commission on February 24, 2022.

10.13*						Erie Indemnity Company Incentive Compensation Deferral Plan (Effective January 1, 2017), dated December 7, 2016. Such exhibit is incorporated by reference to Exhibit 10.177 to the Registrant’s Form 10-K that was filed with the Commission on February 23, 2017.

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Exhibit
Number						Description of Exhibit

10.14*						First Amendment to Erie Indemnity Company Incentive Compensation Deferral Plan (Effective January 1, 2017), dated July 1, 2019. Such exhibit is incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q that was filed with the Commission on July 25, 2019.

10.15*						Second Amendment to Erie Indemnity Company Incentive Compensation Deferral Plan (Effective as of January 1, 2017), dated December 24, 2020. Such exhibit is incorporated by reference to Exhibit 10.207 to the Registrant’s Form 10-K that was filed with the Commission on February 25, 2021.

10.16*						Third Amendment to Erie Indemnity Company Incentive Compensation Deferral Plan (Effective as of January 1, 2017), dated December 21, 2021. Such exhibit is incorporated by reference to Exhibit 10.222 to the Registrant's Form 10-K that was filed with the Commission on February 24, 2022.

10.17*						Erie Indemnity Company Deferred Stock Plan for Outside Directors (As Amended and Restated as of April 25, 2023), dated April 25, 2023. Such exhibit is incorporated by reference to the Appendix to the Registrant’s Information Statement for the 2023 Annual Meeting of Shareholders filed with the Commission on March 24, 2023.

10.18*						Erie Indemnity Company Deferred Compensation Plan for Outside Directors (As Amended and Restated as of July 29, 2015), dated October 20, 2015. Such exhibit is incorporated by reference to Exhibit 10.158 to the Registrant’s Form 10-K that was filed with the Commission on February 25, 2016.

10.19*						First Amendment to Erie Indemnity Company Deferred Compensation Plan for Outside Directors (As of July 29, 2015), dated December 21, 2021. Such exhibit is incorporated by reference to Exhibit 10.217 to the Registrant's Form 10-K that was filed with the Commission on February 24, 2022.

10.20*						Erie Insurance Group Retirement Plan for Employees (As Amended and Restated Effective December 31, 2022), dated June 19, 2023. Such exhibit is incorporated by reference to Exhibit 10.4 to the Registrant's Form 10-Q that was filed with the Commission on July 27, 2023.

10.21+*						First Amendment to Erie Insurance Group Retirement Plan for Employees (As Amended and Restated Effective December 31, 2022), dated December 19, 2023.

10.22*						Supplemental Retirement Plan for Certain Members of the Erie Insurance Group Retirement Plan for Employees (Amended and Restated as of January 1, 2023), dated August 15, 2023. Such exhibit is incorporated by reference to Exhibit 10.1 to the Registrant's Form 10-Q that was filed with the Commission on October 26, 2023.

10.23*						Erie Insurance Group Employee Savings Plan (As Amended and Restated Effective as of January 1, 2023), dated June 19, 2023. Such exhibit is incorporated by reference to Exhibit 10.3 to the Registrant's Form 10-Q that was filed with the Commission on July 27, 2023.

10.24						Credit Agreement by and among Erie Indemnity Company and PNC Bank, National Association, dated as of November 7, 2016. Such exhibit is incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K that was filed with the Commission on November 14, 2016.

10.25						First Amendment to Credit Agreement by and between Erie Indemnity Company and PNC Bank, National Association, dated as of December 13, 2016. Such exhibit is incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K that was filed with the Commission on January 24, 2018.

10.26						Second Amendment to Credit Agreement by and between Erie Indemnity Company and PNC Bank, National Association, dated as of January 22, 2018. Such exhibit is incorporated by reference to Exhibit 10.2 to the Registrant's Form 8-K that was filed with the Commission on January 24, 2018.

10.27						Third Amendment to Credit Agreement by and between Erie Indemnity Company and PNC Bank, National Association, dated as of November 13, 2018. Such exhibit is incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K that was filed with the Commission on November 14, 2018.

10.28						Fourth Amendment to Credit Agreement by and between Erie Indemnity Company and PNC Bank, National Association, dated as of December 28, 2021. Such exhibit is incorporated by reference to Exhibit 10.225 to the Registrant's Form 10-K that was filed with the Commission on February 24, 2022.

10.29						Pledge Agreement made by Erie Indemnity Company in favor of PNC Bank, National Association, dated as of November 7, 2016. Such exhibit is incorporated by reference to Exhibit 10.2 to the Registrant's Form 8-K that was filed with the Commission on November 14, 2016.

10.30						Credit Agreement among PNC Bank, National Association, as Administrative Agent; the Lenders named therein; and Erie Indemnity Company, dated October 29, 2021. Such exhibit is incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K that was filed with the Commission on November 4, 2021.

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Exhibit
Number						Description of Exhibit

10.31						Pledge Agreement made by Erie Indemnity Company in favor of PNC Bank, National Association, as administrative agent, for itself and certain other Lenders, dated October 29, 2021. Such exhibit is incorporated by reference to Exhibit 10.2 to the Registrant's Form 8-K that was filed with the Commission on November 4, 2021.

10.32						Agreement of Lease between Erie Insurance Exchange and Erie Indemnity Company for the Erie Insurance Home Office Campus, dated July 1, 2021. Such exhibit is incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q that was filed with the Commission on October 28, 2021.

10.33						Amendment to Agreement of Lease between Erie Insurance Exchange and Erie Indemnity Company for the Erie Insurance Home Office Campus, (As of July 1, 2021), dated January 1, 2022. Such exhibit is incorporated by reference to Exhibit 10.226 to the Registrant's Form 10-K that was filed with the Commission on February 24, 2022.

10.34						Second Amendment to Agreement of Lease between Erie Insurance Exchange and Erie Indemnity Company for the Erie Insurance Home Office Campus, (As of July 1, 2021), dated January 1, 2023. Such exhibit is incorporated by reference to Exhibit 10.62 to the Registrant's Form 10-K that was filed with the Commission on March 1 , 202 3 .

14.1						Code of Conduct. Such exhibit is incorporated by reference to Exhibit 14.1 to the Registrant's Form 8-K that was filed with the Commission on October 26, 2023.

14.2						Code of Ethics for Senior Financial Officers. Such exhibit is incorporated by reference to Exhibit 14.4 to the Registrant’s Form 8-K that was filed with the Commission on June 1, 2016.

19.1+						Policies with Respect to Securities Trades by Insiders, dated December 5, 2023.

23+						Consent of Independent Registered Public Accounting Firm.

31.1+						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2+						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32++						Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

97.1+						Policy on Recoupment of Officer Bonuses in Certain Situations (As Amended and Restated July 25, 2023).

101.INS+						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH+						Inline XBRL Taxonomy Extension Schema Document.

101.CAL+						Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF+						Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB+						Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE+						Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104+						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Indicates management compensatory plan, contract, or arrangement. + Filed herewith. ++ Furnished herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


February 26, 2024			ERIE INDEMNITY COMPANY
			(Registrant)

By:			/s/ Timothy G. NeCastro
			Timothy G. NeCastro, President and CEO
			(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

February 26, 2024

/s/ Timothy G. NeCastro

Timothy G. NeCastro, President and CEO

(Principal Executive Officer)

/s/ Julie M. Pelkowski

Julie M. Pelkowski, Executive Vice President and CFO

(Principal Financial Officer)

/s/ Jorie L. Novacek

Jorie L. Novacek, Senior Vice President and Controller

(Principal Accounting Officer)

Board of Directors:


/s/ J. Ralph Borneman, Jr.						/s/ C. Scott Hartz
J. Ralph Borneman, Jr.						C. Scott Hartz

/s/ Eugene C. Connell						/s/ Brian A. Hudson, Sr.
Eugene C. Connell						Brian A. Hudson, Sr.

/s/ Salvatore Correnti						/s/ George R. Lucore
Salvatore Correnti						George R. Lucore

/s/ LuAnn Datesh						/s/ Thomas W. Palmer
LuAnn Datesh						Thomas W. Palmer

/s/ Jonathan Hirt Hagen
Jonathan Hirt Hagen						Elizabeth Hirt Vorsheck

/s/ Thomas B. Hagen
Thomas B. Hagen, Chairman


			Page Number
Report of Independent Registered Public Accounting Firm (PCAOB ID: )			39
Statements of Operations for the Years Ended December 31, 202 3 , 202 2 and 202 1			41
Statements of Comprehensive Income for the Years Ended December 31, 202 3 , 202 2 and 202 1			42
Statements of Financial Position - December 31, 202 3 and 202 2			43
Statements of Shareholders' Equity for the Years ended December 31, 202 3 , 202 2 and 202 1			44
Statements of Cash Flows for the Years ended December 31, 202 3 , 202 2 and 202 1			45
Notes to Financial Statements - December 31, 202 3			46

ERIE INDEMNITY CO - Annual Report: 2023 (Form 10-K)

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