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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 impacting the timing of premium rates charged for policies;
◦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, data or network security breaches, including cyber attacks;
•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 Consolidated Financial Statements" contained within this report for a discussion of recently adopted and issued accounting standards and the impact on our consolidated 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 2024, 2023 and 2022. Based on analysis of the foregoing factors, our Board of Directors set the 2025 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 69% of our 2024 policy issuance and renewal expenses. The underwriting services we provide include underwriting and policy processing and comprised approximately 9% of our 2024 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 9% of our 2024 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 its 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. In 2024, approximately 70% of the administrative services expenses were entirely attributable to the respective administrative functions (claims handling, life insurance management and investment management), while the remaining 30% 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 Consolidated 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 71% of the 2024 direct and affiliated assumed written premiums and commercial lines comprising the remaining 29%. 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 Consolidated Statements of Financial Position.
Financial Overview
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years ended December 31, |
| (dollars in thousands, except per share data) | | 2024 | | % Change | | 2023 | | % Change | | 2022 |
| | | | | |
| | | | | |
| | | | | | | | | | | | |
| Operating income | | $ | 676,455 | | | 30.0 | | % | | $ | 520,256 | | | 38.3 | | % | | $ | 376,214 | |
| Total investment income | | 69,260 | | | NM | | | 28,968 | | | NM | | | 632 | |
| Interest expense, net | | — | | | NM | | | — | | | NM | | | 2,009 | |
Other income | | 11,564 | | | (9.0) | | | | 12,712 | | | NM | | | 1,615 | |
| Income before income taxes | | 757,279 | | | 34.8 | | | | 561,936 | | | 49.3 | | | | 376,452 | |
| Income tax expense | | 156,965 | | | 35.5 | | | | 115,875 | | | 48.8 | | | | 77,883 | |
| Net income | | $ | 600,314 | | | 34.6 | | % | | $ | 446,061 | | | 49.4 | | % | | $ | 298,569 | |
| Net income per share - diluted | | $ | 11.48 | | | 34.6 | | % | | $ | 8.53 | | | 49.4 | | % | | $ | 5.71 | |
NM = not meaningful
Operating income increased in 2024 compared to 2023 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 2024, 2023, and 2022. The direct and affiliated assumed premiums written by the Exchange increased 18.4% to $11.9 billion in 2024 and 17.0% to $10.1 billion in 2023.
Cost of operations for policy issuance and renewal services increased 15.0% to $2.3 billion in 2024 primarily due to higher scheduled commissions driven by direct and affiliated assumed written premium growth, as well as increased personnel costs and underwriting report costs, partially offset by decreased professional fees. 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, 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 7.4% to $68.4 million in 2024 compared to an increase of 9.2% in 2023. The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $806.3 million in 2024 and $737.1 million in 2023, but had no net impact on operating income.
Total investment income increased $40.3 million in 2024 primarily due to an increase in net investment income and net realized and unrealized gains in 2024 compared to net realized and unrealized losses in 2023. Total investment income increased $28.3 million in 2023 primarily due to lower realized and unrealized investment losses and an increase in net investment income compared to 2022.
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. 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. 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. Net investment income is impacted 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 environment 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 Consolidated 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
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, 2024, 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, 2024, our investments classified as Level 3 were not significant.
See Item 8. "Financial Statements and Supplementary Data - Note 6, Fair Value, of Notes to Consolidated Financial Statements" contained within this report for additional details on the fair value measurement of our investments.
Retirement Benefit Plan for Employees
Our primary pension plan is a noncontributory defined benefit pension plan covering substantially all employees. Although we are the sponsor of this postretirement plan and record the funded status of the plan, there are reimbursements between us and the Exchange and its insurance subsidiaries for their allocated share of pension income or cost. See Item 8. "Financial Statements and Supplementary Data - Note 10, Postretirement Benefits, of Notes to Consolidated 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 plan. 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 14 years. This yield curve supported the selection of a 5.87% discount rate for the projected benefit obligation at December 31, 2024 and for the 2025 pension expense. The same methodology was used to develop the 5.34% and 5.67% discount rates used to determine the projected benefit obligation for 2023 and 2022, respectively, and the pension income for 2024 and 2023, 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 $4.6 million, of which our share would be approximately $1.8 million, and would increase the pension benefit obligation by $36.3 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-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 13 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. 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. In 2024, we changed our target asset allocation to reduce investment risk by shifting portfolio assets from equity
securities to debt securities. Based on the current asset allocation and a review of the key factors and expectations of future asset performance as well as the current market environment, the expected return on asset assumption will remain at 7.00% for 2025. 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 2024 that related to the actual investment return being different from that assumed during the prior year was a loss of $72.8 million. Recognition of this loss 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 13 years, which is the remaining service period of the employee group.
We recognized net pension benefit income of $1.5 million in 2024 primarily driven by higher expected return on assets, partially offset by a lower discount rate, compared to 2023. We expect to recognize net pension benefit expense of $7.8 million in 2025 primarily driven by anticipated plan progression as well as demographic assumption updates from a 2024 experience study, partially offset by an increase in the discount rate. Our share of the net pension benefit income after reimbursements was $0.6 million in 2024. We expect our share of the net pension benefit expense to be approximately $3.1 million in 2025, of which expense of $13.6 million will be recorded in operating expense and income of $10.5 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 consolidated financial position, results of operations, or cash flows. See Item 8. "Financial Statements and Supplementary Data - Note 10, Postretirement Benefits, of Notes to Consolidated Financial Statements" contained within this report for additional details on the pension plan.
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 2024, 2023 and 2022. 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. Our current transaction price allocation review resulted in a minor change in the allocation between the two performance obligations in 2024 compared to prior years, which did not have a material impact on our financial statements.
The following table presents the allocation and disaggregation of revenue for our two performance obligations:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years ended December 31, |
| (dollars in thousands) | | 2024 | | % Change | | 2023 | | % Change | | 2022 |
| | | | | | | | | | | | |
| Policy issuance and renewal services | | | | | | | | | | | | |
Direct and affiliated assumed premiums written by the Exchange | | $ | 11,903,759 | | | 18.4 | | % | | $ | 10,056,484 | | | 17.0 | | % | | $ | 8,595,960 | |
| Management fee rate | | 24.40 | % | | | | | 24.30 | % | | | | | 24.30 | % |
| Management fee revenue | | 2,904,517 | | | 18.9 | | | | 2,443,726 | | | 17.0 | | | | 2,088,818 | |
Change in estimate for management fee returned on cancelled policies (1) | | (10,443) | | | NM | | | (1,653) | | | (70.0) | | | | (972) | |
| Management fee revenue - policy issuance and renewal services | | $ | 2,894,074 | | | 18.5 | | % | | $ | 2,442,073 | | | 17.0 | | % | | $ | 2,087,846 | |
| | | | | | | | | | | | |
| Administrative services | | | | | | | | | | | | |
Direct and affiliated assumed premiums written by the Exchange | | $ | 11,903,759 | | | 18.4 | | % | | $ | 10,056,484 | | | 17.0 | | % | | $ | 8,595,960 | |
| Management fee rate | | 0.60 | % | | | | | 0.70 | % | | | | | 0.70 | % |
| Management fee revenue | | 71,423 | | | 1.5 | | | | 70,395 | | | 17.0 | | | | 60,172 | |
Change in contract liability (2) | | (2,985) | | | 55.4 | | | | (6,690) | | | NM | | | (1,865) | |
Change in estimate for management fee returned on cancelled policies (1) | | (83) | | | NM | | | (36) | | | NM | | | 16 | |
| | | | | |
| Management fee revenue - administrative services | | 68,355 | | | 7.4 | | | | 63,669 | | | 9.2 | | | | 58,323 | |
Administrative services reimbursement revenue | | 806,336 | | | 9.4 | | | | 737,139 | | | 10.3 | | | | 668,268 | |
Total revenue from administrative services | | $ | 874,691 | | | 9.2 | | % | | $ | 800,808 | | | 10.2 | | % | | $ | 726,591 | |
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 Consolidated Financial Statements" contained within this report.
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 18.4% to $11.9 billion in 2024, from $10.1 billion in 2023, primarily driven by increased personal lines and commercial multi-peril premiums written. Year-over-year policies in force for all lines of business increased 4.8% in 2024 as a result of continued strong policyholder retention, compared to 6.9% in 2023. The year-over-year average premium per policy for all lines of business increased 13.4% at December 31, 2024 compared to 9.4% at December 31, 2023.
Premiums generated from new business increased 14.2% to $1.7 billion in 2024. While year-over-year average premium per policy on new business increased 16.6% at December 31, 2024, new business policies written decreased 2.1% in 2024. Premiums generated from new business increased 37.9% to $1.5 billion in 2023. New business policies written increased 23.7% in 2023 and year-over-year average premium per policy on new business increased 11.5% at December 31, 2023.
Premiums generated from renewal business increased 19.1% to $10.2 billion in 2024, and increased 13.9% to $8.5 billion, in 2023. Underlying the trend in renewal business premiums in both periods were increases in year-over-year average premium per policy of 12.9% at December 31, 2024 and 9.0% at December 31, 2023, as well as an increase in year-over-year policies in force of 6.0% and 4.5% in 2024 and 2023, respectively.
The Exchange implements rate changes in order to meet loss cost expectations. In 2022 and continuing through 2024, the Exchange implemented rate increases primarily as a result of inflation-driven severity increases. As the Exchange writes policies almost exclusively with annual terms, premium 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 2023 were reflected in 2024, and a portion of the premium rate actions approved in 2024 will be reflected in 2025. Furthermore, the Exchange writes certain personal auto policies with a rate locking feature, which generally extends the amount of time it takes for premium rate actions to be recognized related to these policies. The Exchange continuously evaluates pricing and product offerings to meet consumer demands.
Personal lines – Total personal lines premiums written increased 20.0% to $8.5 billion in 2024, from $7.1 billion in 2023, driven by a 15.1% increase in total personal lines year-over-year average premium per policy and a 4.8% increase in total personal lines policies in force. Total personal lines year-over-year average premium per policy increased 10.5% at December 31, 2023 and policies in force increased 7.4% in 2023.
Commercial lines – Total commercial lines premiums written increased 14.5% to $3.4 billion in 2024, from $3.0 billion in 2023, driven by a 9.4% increase in the total commercial lines year-over-year average premium per policy and a 4.6% increase in total commercial lines policies in force. Total commercial lines premiums written increased 13.0% 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.
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 competitors, could affect the ability of the Exchange's agents to retain and attract new business. We expect the Exchange's pricing actions in 2024 to result in an increase in direct written premiums in 2025; 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) | | 2024 | | % Change | | 2023 | | % Change | | 2022 |
| | | | | | | | | | | | |
| Management fee revenue - policy issuance and renewal services | | $ | 2,894,074 | | | 18.5 | | % | | $ | 2,442,073 | | | 17.0 | | % | | $ | 2,087,846 | |
| Service agreement revenue | | 26,350 | | | 1.1 | | | | 26,059 | | | 1.4 | | | | 25,687 | |
| | 2,920,424 | | | 18.3 | | | | 2,468,132 | | | 16.8 | | | | 2,113,533 | |
| Cost of operations - policy issuance and renewal services | | 2,312,324 | | | 15.0 | | | | 2,011,545 | | | 12.0 | | | | 1,795,642 | |
Operating income - policy issuance and renewal services | | $ | 608,100 | | | 33.2 | | % | | $ | 456,587 | | | 43.6 | | % | | $ | 317,891 | |
| | | | | |
Policy issuance and renewal services
The management fee revenue allocated for providing policy issuance and renewal services was 24.40% of the direct and affiliated assumed premiums written by the Exchange in 2024 and 24.30% in both 2023 and 2022. 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.
Cost of policy issuance and renewal services
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| | Years ended December 31, |
| (dollars in thousands) | | 2024 | | % Change | | 2023 | | % Change | | 2022 |
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| Commissions: | | | | | | | | | | | | |
| Total commissions | | $ | 1,601,401 | | | 18.8 | | % | | $ | 1,348,530 | | | 14.3 | | % | | $ | 1,179,569 | |
| Non-commission expense: | | | | | | | | | | | | |
| Underwriting and policy processing | | $ | 199,485 | | | 10.2 | | % | | $ | 181,003 | | | 5.5 | | % | | $ | 171,625 | |
| Information technology | | 215,488 | | | (0.6) | | | | 216,746 | | | 9.4 | | | | 198,157 | |
| Sales and advertising | | 66,480 | | | 12.9 | | | | 58,905 | | | (1.8) | | | | 60,000 | |
| Customer service | | 43,045 | | | 25.2 | | | | 34,391 | | | 0.2 | | | | 34,333 | |
| Administrative and other | | 186,425 | | | 8.4 | | | | 171,970 | | | 13.2 | | | | 151,958 | |
| Total non-commission expense | | 710,923 | | | 7.2 | | | | 663,015 | | | 7.6 | | | | 616,073 | |
Total cost of operations - policy issuance and renewal services | | $ | 2,312,324 | | | 15.0 | | % | | $ | 2,011,545 | | | 12.0 | | % | | $ | 1,795,642 | |
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Commissions – Commissions increased $252.9 million in 2024 compared to 2023, primarily driven by the growth in direct and affiliated assumed written premium. 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.
Non-commission expense – Non-commission expense increased $47.9 million in 2024 compared to 2023. Underwriting and policy processing expense increased $18.5 million primarily due to increased underwriting report and personnel costs. Information technology costs decreased $1.3 million primarily due to a decrease in professional fees and personnel costs, partially offset by an increase in hardware and software costs. Sales and advertising expense increased $7.6 million primarily due to increased agent-related costs and costs from community development initiatives. Customer service costs increased $8.7 million primarily due to increased personnel costs and credit card processing fees. Administrative and other costs increased
$14.5 million primarily due to increased personnel costs, charitable contributions and professional fees. Personnel costs in 2024 were impacted by increased compensation.
In 2023, non-commission expense increased $46.9 million compared to 2022. Underwriting and policy processing expense 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 costs 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.
Administrative services
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| | Years ended December 31, |
| (dollars in thousands) | | 2024 | | % Change | | 2023 | | % Change | | 2022 |
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| Management fee revenue - administrative services | | $ | 68,355 | | | 7.4 | | % | | $ | 63,669 | | | 9.2 | | % | | $ | 58,323 | |
Administrative services reimbursement revenue | | 806,336 | | | 9.4 | | | | 737,139 | | | 10.3 | | | | 668,268 | |
Total revenue allocated to administrative services | | 874,691 | | | 9.2 | | | | 800,808 | | | 10.2 | | | | 726,591 | |
Administrative services expenses | | | | | | | | | | | | |
Claims handling services | | 690,662 | | | 8.8 | | | | 635,043 | | | 10.1 | | | | 576,799 | |
Investment management services | | 34,889 | | | (0.2) | | | | 34,958 | | | (5.0) | | | | 36,795 | |
Life management services | | 80,785 | | | 20.3 | | | | 67,138 | | | 22.8 | | | | 54,674 | |
Operating income - administrative services | | $ | 68,355 | | | 7.4 | | % | | $ | 63,669 | | | 9.2 | | % | | $ | 58,323 | |
Administrative services
The management fee revenue allocated to administrative services was 0.60% of the direct and affiliated assumed premiums written by the Exchange in 2024 and 0.70% in both 2023 and 2022. 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 Consolidated Statements of Operations.
Cost of administrative services
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 its 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. The subscriber's agreement and service agreements provide for reimbursement of amounts incurred for these services to Indemnity. Reimbursements due from the Exchange and its insurance subsidiaries are recorded as a receivable and settled at cost.
Total investment income
A summary of the results of our investment operations is as follows for the years ended December 31:
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| (dollars in thousands) | | 2024 | | % Change | | 2023 | | % Change | | 2022 |
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| Net investment income | | $ | 70,155 | | | 57.4 | | % | | $ | 44,572 | | | 55.9 | | % | | $ | 28,585 | |
| Net realized and unrealized investment gains (losses) | | 3,229 | | | NM | | | (5,838) | | | 78.6 | | | | (27,286) | |
| Net impairment losses recognized in earnings | | (4,124) | | | 57.8 | | | | (9,766) | | | NM | | | (667) | |
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| Total investment income | | $ | 69,260 | | | NM | % | | $ | 28,968 | | | NM | % | | $ | 632 | |
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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 $25.6 million in 2024, compared to 2023, primarily due to improved results of limited partnership investments and an increase in bond and cash and cash equivalent income as a result of higher bond yields and average holdings. 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 includes limited partnership earnings of $2.0 million in 2024 compared to limited partnership losses of $11.3 million and $10.4 million in 2023 and 2022, respectively.
Net realized and unrealized investment gains (losses)
A breakdown of our net realized and unrealized investment gains (losses) is as follows for the years ended December 31:
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| (in thousands) | | 2024 | | 2023 | | 2022 |
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| Securities sold: | | | | | | |
| Available-for-sale securities | | $ | (1,620) | | | $ | (6,719) | | | $ | (14,050) | |
| Equity securities | | 1,213 | | | (2,328) | | | (1,866) | |
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| Change in fair value on remaining equity securities | | 3,635 | | | 3,199 | | | (11,372) | |
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| Miscellaneous | | 1 | | | 10 | | | 2 | |
| Net realized and unrealized investment gains (losses) | | $ | 3,229 | | | $ | (5,838) | | | $ | (27,286) | |
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Net realized and unrealized gains of $3.2 million in 2024 were primarily due to favorable market value adjustments and gains on disposals of equity securities, partially offset by losses on disposals of available-for-sale securities. 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, while losses of $27.3 million in 2022 were primarily due to disposals of available-for-sale securities and market value adjustments on equity securities.
Net impairment losses recognized in earnings
Net impairment losses of $4.1 million in 2024 primarily include current expected credit losses on held-to-maturity securities and other loans receivable. Impairment losses of $9.8 million in 2023 primarily include current expected credit losses on other loans receivable and intent to sell impairments on available-for-sale securities. Net impairment losses of $0.7 million in 2022 include both credit-related and intent to sell impairments on available-for-sale securities. See "Other assets" in Item 8. "Financial Statements and Supplementary Data - Note 2, Significant Accounting Policies, of Notes to Consolidated Financial Statements" for additional information on other loans receivable and held-to-maturity securities.
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 insurance 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. As of December 31, 2024, only approximately 13% of insurance groups, in which the Exchange is included, are rated A+ or higher. On August 8, 2024, while our A+ "Superior" rating was reaffirmed, the financial strength rating outlook was revised from stable to negative. The outlook was primarily driven by the Exchange’s recent profitability challenges from rising loss cost pressures and increased weather-related activity, and the related surplus impact. The outlook acknowledged that while actions have been implemented to address the challenges, the timing lag related to the most significant action, rate increases, could result in interim challenges until such time as the rate increases are earned and the full beneficial impact is realized.
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 insurance subsidiaries grew 18.4% to $11.9 billion in 2024 from $10.1 billion in 2023. 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 at both December 31, 2024 and December 31, 2023. The Exchange and its wholly owned property and casualty insurance subsidiaries' year-over-year policy retention ratio continues to be high at 90.4% at December 31, 2024 and 91.2% at December 31, 2023.
We have prepared our consolidated 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.
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:
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| (dollars in thousands) | | 2024 | | % to total | | 2023 | | % to total |
Available-for-sale securities (1) | | $ | 1,043,615 | | | 83 | % | | $ | 961,241 | | | 85 | % |
| Equity securities | | 85,891 | | | 7 | | | 84,253 | | | 7 | |
Agent loans (2) | | 92,731 | | | 7 | | | 67,787 | | | 6 | |
Other investments (3) | | 29,610 | | | 3 | | | 23,026 | | | 2 | |
Total investments | | $ | 1,251,847 | | | 100 | % | | $ | 1,136,307 | | | 100 | % |
(1)This includes $7.3 million of securities lent under a securities lending agreement.
(2)The current portion of agent loans is included in the line item "Prepaid expenses and other current assets, net" in the Consolidated Statements of Financial Position.
(3)The current and long-term portions of other investments are included in the line items "Prepaid expenses and other current assets, net" and "Other assets, net", respectively, in the Consolidated 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 Consolidated Statements 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.
Available-for-sale securities
Under our investment strategy, we maintain an available-for-sale portfolio that is of high quality and well diversified within each market sector. This investment strategy also achieves a balanced maturity schedule. Our available-for-sale portfolio is managed with the goal of achieving reasonable returns while limiting exposure to risk.
Available-for-sale securities are carried at fair value with unrealized gains and losses, net of deferred taxes, included in shareholders' equity. Net unrealized losses on available-for-sale securities, net of deferred taxes, totaled $17.6 million at December 31, 2024, compared to $24.7 million at December 31, 2023. 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 available-for-sale portfolio by industry sector and rating as of December 31, 2024: (1)
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| (in thousands) | | AAA | | AA | | A | | BBB | | Non-investment
grade | | Fair
value |
| Basic materials | | $ | 0 | | | $ | 0 | | | $ | 961 | | | $ | 2,156 | | | $ | 8,809 | | | $ | 11,926 | |
| Communications | | 0 | | | 5,967 | | | 12,615 | | | 14,030 | | | 11,882 | | | 44,494 | |
| Consumer | | 0 | | | 1,976 | | | 32,822 | | | 63,195 | | | 42,072 | | | 140,065 | |
| Diversified | | 0 | | | 0 | | | 0 | | | 0 | | | 679 | | | 679 | |
| Energy | | 0 | | | 849 | | | 5,720 | | | 17,003 | | | 14,326 | | | 37,898 | |
| Financial | | 0 | | | 6,303 | | | 103,826 | | | 134,849 | | | 20,307 | | | 265,285 | |
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| Industrial | | 0 | | | 0 | | | 5,367 | | | 18,315 | | | 27,943 | | | 51,625 | |
Structured securities (2) | | 163,273 | | | 183,706 | | | 28,095 | | | 17,146 | | | 844 | | | 393,064 | |
| Technology | | 1,941 | | | 0 | | | 0 | | | 19,389 | | | 14,202 | | | 35,532 | |
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| Utilities | | 0 | | | 0 | | | 11,022 | | | 40,907 | | | 11,118 | | | 63,047 | |
Total | | $ | 165,214 | | | $ | 198,801 | | | $ | 200,428 | | | $ | 326,990 | | | $ | 152,182 | | | $ | 1,043,615 | |
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(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.
Equity securities
Equity securities primarily include nonredeemable preferred stocks and are carried at fair value in the Consolidated Statements of Financial Position with all changes in unrealized gains and losses reflected in the Consolidated Statements of Operations.
The following table presents an analysis of the fair value of our equity securities by sector as of December 31:
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| (in thousands) | | 2024 | | 2023 |
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| 69,900 | |
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| 84,253 | |
Shareholders' Equity
Postretirement benefit plans
The funded status of our postretirement benefit plans is recognized in the Consolidated Statements of Financial Position, with a corresponding adjustment to accumulated other comprehensive income (loss), net of tax. At December 31, 2024, shareholders' equity amounts related to these postretirement plans decreased by $41.3 million, net of tax, of which $5.2 million primarily represents amortization of net actuarial gain and $36.1 million primarily represents the current period actuarial loss. The 2024 actuarial loss was driven primarily by the lower than expected return on plan assets, partially offset by the higher discount rate used to measure the future benefit obligations. 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 primarily represents the current period actuarial loss. The 2023 actuarial loss was driven by the lower discount rate used to measure the future benefit obligations, partially offset by higher 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 insurance subsidiaries for their allocated share of pension income or cost. See Item 8. "Financial Statements and Supplementary Data - Note 10, Postretirement Benefits, of Notes to Consolidated Financial Statements" contained within this report for additional details on these reimbursements.
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 2024, future market disruptions 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 November 1, 2029. See broader discussions of potential risks to our operations in Operating Overview and 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 10, Postretirement Benefits, of Notes to Consolidated 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 11, Incentive and Deferred Compensation Plans, of Notes to Consolidated Financial Statements" for additional details of these obligations and estimated future payments.
•Home office renovations – We have agreements with external contracting firms for renovations to an office building that is part of our principal headquarters. Remaining commitments related to the underlying contracts total $45.4 million at December 31, 2024, of which over half is due in the next 12 months. 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 8, Fixed Assets, of Notes to Consolidated Financial Statements" for additional details on construction in progress costs and expected completion date.
•Other commitments – We have commitments for approximately $460 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 insurance 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. Additionally, if we require
significant amounts of cash on short notice in excess of anticipated cash requirements, or if we are required to return cash
collateral in connection with our securities lending program, we may have difficulty selling investments in a timely manner, or
be forced to sell at deep discounts. We believe we have sufficient liquidity to meet our needs from sources other than the liquidation of securities.
Cash flow activities
The following table provides condensed cash flow information for the years ended December 31:
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| (in thousands) | | 2024 | | 2023 | | 2022 |
| Net cash provided by operating activities | | $ | 611,249 | | | $ | 381,205 | | | $ | 366,152 | |
| Net cash used in investing activities | | (226,912) | | | (157,565) | | | (106,922) | |
| Net cash used in financing activities | | (229,995) | | | (221,675) | | | (300,842) | |
Net increase (decrease) in cash, cash equivalents and restricted cash | | $ | 154,342 | | | $ | 1,965 | | | $ | (41,612) | |
Net cash provided by operating activities was $611.2 million in 2024, compared to $381.2 million in 2023 and $366.2 million in 2022. Increased cash provided by operating activities in 2024, compared to 2023, was primarily due to an increase in management fees received of $478.2 million driven by growth in direct and affiliated assumed premiums written by the Exchange, a decrease in pension and employee benefits paid of $59.0 million due to lower pension contributions, and a decrease in incentive compensation paid to agents of $25.3 million. Pension contributions totaled $33.0 million in 2024 compared to $95.0 million in 2023. This was partially offset by increases in cash paid for agent commissions of $243.3 million driven by premium growth and income taxes paid of $55.5 million. 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 higher pension contributions, and general operating expenses paid of $30.3 million primarily driven by higher information technology-related professional fees and hardware and software costs.
Net cash used in investing activities was $226.9 million in 2024, compared to $157.6 million in 2023 and $106.9 million in 2022. In 2024, 2023 and 2022, net cash used in investing activities was primarily driven by fixed asset purchases of $124.8 million, $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 all periods, while 2024 and 2023 also included loans issued to fund real estate development projects supporting revitalization efforts in our community.
Net cash used in financing activities was $230.0 million in 2024, compared to $221.7 million in 2023 and $300.8 million in 2022 primarily due to dividends paid to shareholders. While we increased both our Class A and Class B shareholder regular quarterly dividends by 7.1% in 2024 and 7.2% in 2023, the change in net cash used related to financing activities in 2023 compared to 2022 was 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 totaled approximately $271.0 million at December 31, 2024, 2) $100 million available bank revolving line of credit, and 3) liquidation of unrestricted and unpledged assets held in our investment portfolio, including equity securities and investment grade bonds, which totaled approximately $849.8 million at December 31, 2024. 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. See Item 8. "Financial Statements and Supplementary Data - Note 9, Bank Line of Credit, of Notes to Consolidated Financial Statements" for additional information related to our bank revolving line of credit.
Off-Balance Sheet Arrangements
We have entered into certain contingent obligations for guarantees. See Item 8. "Financial Statements and Supplementary Data - Note 17, Commitments and Contingencies, of Notes to Consolidated Financial Statements" for additional information. We do not believe that these obligations will have a material current or future effect on our consolidated financial condition, results of operations, or cash flows.
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 all our companies and facilitates 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 establish risk tolerance ranges to monitor and manage significant risks. 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 insurance 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 insurance subsidiaries have a service agreement with Indemnity to use space in Indemnity-owned properties. See Item 8. "Financial Statements and Supplementary Data - Note 15, Related Party, of Notes to Consolidated Financial Statements" for additional details.
Cost Allocation
The allocation of costs affects our consolidated financial condition and that of the Exchange and its wholly owned insurance 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.
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 $707.1 million, or 24.5% of total assets, at December 31, 2024 and $625.3 million, or 25.3% of total assets, at December 31, 2023. 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 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 15, Related Party, of Notes to Consolidated 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, 2024.
Interest Rate Risk
We invest primarily in fixed maturity investments, which comprised 84% of our invested assets at December 31, 2024. 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.
| | | | | | | | | | | | | | |
|
|
| (dollars in thousands) | | 2024 | | 2023 |
| | |
| Fair value of fixed maturity portfolio | | $ | 1,048,549 | | | $ | 961,241 | |
| Fair value assuming 100-basis point rise in interest rates | | $ | 1,018,957 | | | $ | 935,444 | |
| Effective duration (as a percentage) | | 2.9 | | 2.7 |
| | |
| | |
| | |
| | |
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, 2024. Actual cash flows may differ from those stated as a result of calls, prepayments, or defaults.
| | | | | | | | |
| (in thousands) | | |
| Year ending December 31, | | Future Principal Cash Flows |
| 2025 | | $ | 45,052 | |
| 2026 | | 75,391 | |
| 2027 | | 130,135 | |
| 2028 | | 131,000 | |
| 2029 | | 123,003 | |
| Thereafter | | 572,918 | |
| Total | | $ | 1,077,499 | |
| Fair value | | $ | 1,048,549 | |
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 the vast majority of our 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.
The following tables show our fixed maturity investments by rating (1):
| | | | | | | | | | | | | | | | | | | | |
| | At December 31, 2024 |
| (dollars in thousands) | | Amortized cost | | Fair value | | Percent of total |
|
| AAA, AA, A | | $ | 584,600 | | | $ | 564,443 | | | 54 | % |
| BBB | | 328,561 | | | 326,990 | | | 31 | |
| Total investment grade | | 913,161 | | | 891,433 | | | 85 | |
| BB | | 71,000 | | | 70,845 | | | 7 | |
| B | | 68,944 | | | 69,068 | | | 6 | |
| CCC, CC, C, and below | | 17,684 | | | 17,203 | | | 2 | |
| Total non-investment grade | | 157,628 | | | 157,116 | | | 15 | |
| Total | | $ | 1,070,789 | | | $ | 1,048,549 | | | 100 | % |
|
|
|
|
|
|
|
|
|
|
| 992,553 | | | $ | 961,241 | | | 100 | % |
(1) Ratings are supplied by S&P, Moody's, and Fitch with the exception of held-to-maturity securities, which are unrated. 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 Consolidated 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.
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 consolidated statements of financial position of Erie Indemnity Company (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, 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, 2024, 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 27, 2025 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.
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 consolidated 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.
| | | | | | | | |
| | Cost of Operations - administrative services
|
| Description of the Matter | | For the year ended December 31, 2024, the Company’s cost of operations – administrative services totaled $806.3 million. As explained in Note 2 of the consolidated financial statements, the Company serves as the attorney-in-fact on behalf of the subscribers at the Erie Insurance Exchange (Exchange) with respect to its administrative services as enumerated in the subscriber’s agreement. The Exchange’s insurance subsidiaries also utilize the Company for these services in accordance with the service agreements between the subsidiaries and the Company. Certain administrative services costs, which include costs associated with claims handling services, life insurance management services, 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 cost of operations – administrative services was complex due to the multiple costs that are allocated for reimbursement, 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 cost of operations – administrative services process. This included, among others, testing 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 cost of operations – administrative services, 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 the Exchange and its insurance subsidiaries. We tested the completeness of the costs subjected to allocation by agreeing the costs recorded in the general ledger to the cost allocation calculation. We performed a test of details over a sample of cost allocations for accuracy.
|
/s/
We have served as the Company's auditor since 2003.
February 27, 2025
ERIE INDEMNITY COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 2024, 2023 and 2022
(dollars in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | |
| | 2024 | | 2023 | | 2022 |
| 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 gains (losses) | | | | | () | | | () | |
Net impairment losses recognized in earnings | | () | | | () | | | () | |
|
Total investment income | | | | | | | | | |
| | | | | | |
| Interest expense, net | | | | | | | | | |
Other income | | | | | | | | | |
| 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 | | $ | | | | $ | | | | $ | | |
| Class B common stock – 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 Consolidated Financial Statements. See Note 14, "Accumulated Other Comprehensive Income (Loss)", for amounts reclassified out of accumulated other comprehensive income (loss) into the Consolidated Statements of Operations.
ERIE INDEMNITY COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31, 2024, 2023 and 2022
(in thousands)
| | | | | | | | | | | | | | | | | | | | |
| | 2024 | | 2023 | | 2022 |
| 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 | | $ | | | | $ | | | | $ | | |
See accompanying notes to Consolidated Financial Statements. See Note 14, "Accumulated Other Comprehensive Income (Loss)", for amounts reclassified out of accumulated other comprehensive income (loss) into the Consolidated Statements of Operations.
ERIE INDEMNITY COMPANY
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
At December 31, 2024 and 2023
(dollars in thousands, except per share data)
| | | | | | | | | | | | | | |
| | 2024 | | 2023 |
| 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, net | | | | | | |
| | |
| | |
| | |
| Accrued investment income | | | | | | |
| Total current assets | | | | | | |
| | | | |
| Available-for-sale securities, net | | | | | | |
Available-for-sale securities lent | | | | | | |
| 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 | | | | | | |
| Securities lending payable | | | | | | |
| | |
| Total current liabilities | | | | | | |
| | | | |
| Defined benefit pension plan | | | | | | |
| | |
| 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 Consolidated Financial Statements.
ERIE INDEMNITY COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31, 2024, 2023 and 2022
(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, 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 | $ | | | $ | | | $ | | | $ | () | | $ | | | $ | () | | $ | | | $ | | |
| 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, 2024 | $ | | | $ | | | $ | | | $ | () | | $ | | | $ | () | | $ | | | $ | | |
(1)
(2) incentive compensation deferral plan participants in 2022 and incentive compensation plan deferral plan participants in both 2023 and 2024. See Note 11, "Incentive and Deferred Compensation Plans".
See accompanying notes to Consolidated Financial Statements.
ERIE INDEMNITY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2024, 2023 and 2022
(in thousands)
| | | | | | | | | | | | | | | | | | | | |
| | 2024 | | 2023 | | 2022 |
| 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 others | | () | | | () | | | () | |
Collections on agent loans | | | | | | | | | |
|
| Net cash used in investing activities | | () | | | () | | | () | |
| | | | | | |
| Cash flows from financing activities | | | | | | |
|
| Dividends paid to shareholders | | () | | | () | | | () | |
|
| Net changes in cash collateral for securities lent | | | | | | | | | |
| 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 Consolidated Financial Statements. See Note 18, "Supplementary Data on Cash Flows", for additional supplemental cash flow information.
ERIE INDEMNITY COMPANY
NOTES TO CONSOLIDATED 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 2024 policy issuance and renewal expenses. The underwriting services we provide include underwriting and policy processing and comprised approximately % of our 2024 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 2024 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 its 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 16, "Concentrations of Credit Risk".
Note 2.
% of the estimated fair value of the securities loaned, and maintained at a level greater than or equal to % for the duration of the loan. We monitor the ratio of the collateral held to the estimated fair value of the securities loaned on a daily basis and obtain additional collateral as necessary. A securities lending transaction may be terminated at any time by the borrower or the lender. If terminated, we would repay our securities lending obligations from the sale of reinvested collateral or the proceeds of sales from our investment portfolio, which includes liquid securities.
- 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.
% 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 Consolidated 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.
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 Consolidated Statements of Financial Position. For the years ended December 31, 2024, 2023, and 2022, 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 Consolidated 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 almost exclusively with annual terms, cash collections generally occur within one year.
performance obligations for the years ended December 31: | | | | | | | | | | | | | | | | | | | | |
| (in thousands) | | 2024 | | 2023 | | 2022 |
| Management fee revenue - policy issuance and renewal services | | $ | | | | $ | | | | $ | | |
| | | | | | |
| Management fee revenue - administrative services | | | | | | | | | |
| Administrative services reimbursement revenue | | | | | | | | | |
| Total revenue from administrative services | | $ | | | | $ | | | | $ | | |
|
|
Note 4.
reportable segment: management operations. All segment revenue is derived in the United States, the majority of which is from the subscriber’s agreement between us and the subscribers (policyholders) at the Exchange, our sole customer, as further described in Note 3, "Revenue". Our chief operating decision maker ("CODM") is our Executive Council, which includes our Chief Executive Officer ("CEO"), Chief Financial Officer, executive vice presidents and certain senior vice presidents reporting directly to the CEO as applicable. The CODM assesses performance for the management operations segment and decides how to allocate resources based on net income, as reported in our Consolidated Statements of Operations. Net income is used to monitor budget versus actual results. Total assets as reported in our Consolidated Statements of Financial Position, all of which are located in the United States, are reviewed by the CODM for purposes of decision making. The accounting policies of our management operations segment are the same as those described in Note 2, "Significant Accounting Policies".
| | $ | | | | $ | | | | Administrative services reimbursement revenue | | | | | | | | |
| Service agreement revenue | | | | | | | | |
| Total operating revenue | | | | | | | | |
| | | | | |
| Commissions | | | | | | | | |
| Underwriting and policy processing | | | | | | | | |
| Information technology | | | | | | | | |
| Sales and advertising | | | | | | | | |
| Customer service | | | | | | | | |
| Administrative and other | | | | | | | | |
Cost of operations - policy issuance and renewal services | | | | | | | | |
Cost of operations - administrative services | | | | | | | | |
Total operating expenses (1) | | | | | | | | |
Operating income | | | | | | | | |
| | | | | |
| Total investment income | | | | | | | | |
| Interest expense, net | | | | | | | | |
| Other income | | | | | | | | |
| Income tax expense | | | | | | | | |
Net income | $ | | | | $ | | | | $ | | |
(1) See Note 8, "Fixed Assets", for management operations segment depreciation and amortization expense included in "Total operating expenses", as reported on our Consolidated Statements of Operations. See our Consolidated Statements of Cash Flows for segment
expenditures on fixed asset additions.
Note 5.
to 1. See Note 13, "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 11, "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 | | $ | | | | | | | $ | | | | $ | | | | | | | $ | | | | $ | | | | | | | $ | | |
Note 6.
| | $ | | | | $ | | | | $ | | | | 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 | | | | | | | | | | | | |
| |
| Communications sector | | | | | | | | | | | | |
| Total equity securities | | | | | | | | | | | | |
| Total | | $ | | | | $ | | | | $ | | | | $ | | |
(1) This includes $ million of securities lent under a securities lending agreement.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | December 31, 2023 |
|
| (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 | | | | | | | | | | | | |
| Technology sector | | | | | | | | | | | | |
| Industrial sector | | | | | | | | | | | | |
| Communications sector | | | | | | | | | | | | |
| |
| Total equity securities | | | | | | | | | | | | |
| Total | | $ | | | | $ | | | | $ | | | | $ | | |
| | $ | () | | | $ | | | | $ | | | | $ | () | | | $ | | | | $ | () | | | $ | | | | | | | | | | | | |
| Commercial mortgage-backed securities | | | | | () | | | | | | | | | () | | | | | | () | | | | |
| Residential mortgage-backed securities | | | | | () | | | () | | | | | | () | | | | | | () | | | | |
| | | | | | | | | |
| Total available-for-sale securities | | | | | () | | | | | | | | | () | | | | | | () | | | | |
| Equity securities | | | | | | | | | | | | | | () | | | | | | () | | | | |
| Total Level 3 securities | | $ | | | | $ | () | | | $ | | | | $ | | | | $ | () | | | $ | | | | $ | () | | | $ | | |
Level 3 Assets – 2023 Year-to-Date Change:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| (in thousands) | | Beginning balance at December 31, 2022 | | 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, 2023 |
| 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 gains (losses) 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) | | | | | | | | | | | | |
Held-to-maturity securities, net (3) | | | | | | | | | | | | |
| |
(1) The current portion of agent loans is included in the line item "Prepaid expenses and other current assets, net" in the Consolidated Statements of Financial Position.
(2) The current and long-term portions of other loans receivable are included in the line items "Prepaid expenses and other current assets, net" and "Other assets, net", respectively, in the Consolidated Statements of Financial Position.
(3) Held-to-maturity securities are included in the line item "Other assets, net" in the Consolidated Statements of Financial Position.
Note 7.
| | $ | | | | $ | | | | $ | | |
| Collateralized debt obligations | | | | | | | | | | | | |
| Commercial mortgage-backed securities | | | | | | | | | | | | |
| Residential mortgage-backed securities | | | | | | | | | | | | |
| Other debt securities | | | | | | | | | | | | |
| |
| Total available-for-sale securities, net | | | | | | | | | | | | |
| Held-to-maturity securities - states & political subdivisions | | | | | | | | | | |
| Total fixed maturity securities, net | | $ | | | | $ | | | | $ | | | | $ | | |
(1) This includes an estimated fair value of $ million of securities lent under a securities lending agreement.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | December 31, 2023 |
| (in thousands) | | Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Estimated fair value |
| 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, 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) (2) | | | | | | |
| Held-to-maturity securities - due after ten years | | | | | | |
| Total fixed maturity securities, net | | $ | | | | $ | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
(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 Consolidated Statement of Financial Position at December 31, 2024.
(2) This includes an estimated fair value of $ million of securities lent under a securities lending agreement.
| | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | | |
| 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, 2023 |
| | 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 | | () | | | | | | | | | | |
| Balance, end of period | | $ | | | | $ | | | | $ | | | | $ | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2023 |
| (in thousands) | | Available-for-sale securities | | Held-to-maturity securities | | Other loans receivable | | Agent loans |
| Balance, beginning of period | | $ | | | | $ | | | | $ | | | | $ | | |
| Provision and recoveries | | | | | | | | | | | | |
| Sales/collections and write-offs | | () | | | | | | () | | | | |
| Balance, end of period | | $ | | | | $ | | | | $ | | | | $ | | |
| | $ | | | | $ | | | | Equity securities | | | | | | | | | |
Limited partnerships (1) | | | | | () | | | () | |
| Cash equivalents and other | | | | | | | | | |
| Total investment income | | | | | | | | | |
| Less: investment expenses | | | | | | | | | |
| Net investment income | | $ | | | | $ | | | | $ | | |
|
|
|
|
|
|
|
(1) Limited partnership income (losses) include both realized gains (losses) and unrealized valuation changes. Our limited partnership investments are included in the line item "Other assets, net" in the Consolidated 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 gains (losses)
| | $ | | | | $ | | |
| Gross realized losses | | () | | | () | | | () | |
| Net realized losses on available-for-sale securities | | () | | | () | | | () | |
|
|
|
| Equity securities | | | | | | | | () | |
|
|
|
|
|
|
|
|
|
| Miscellaneous | | | | | | | | | |
|
|
|
|
| Net realized and unrealized investment gains (losses) | | $ | | | | $ | () | | | $ | () | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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) | | 2024 | | 2023 | | 2022 |
| Equity securities: | | | | | | |
| Net gains (losses) recognized during the period | | $ | | | | $ | | | | $ | () | |
| Less: net gains (losses) recognized on securities sold | | | | | () | | | () | |
| Net unrealized gains (losses) recognized on securities held at reporting date | | $ | | | | $ | | | | $ | () | |
Net impairment losses recognized in earnings
) | | $ | () | | | $ | () | |
| Credit impaired | | () | | | () | | | () | |
| Total available-for-sale securities | | () | | | () | | | () | |
| Expected credit losses: | | | | | | |
|
| Held-to-maturity securities | | () | | | | | | | |
| Agent loans | | () | | | | | | | |
Other loans receivable | | () | | | () | | | | |
| Net impairment losses recognized in earnings | | $ | () | | | $ | () | | | $ | () | |
|
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|
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million and the related cash collateral received was $ million, which was reinvested in cash equivalents and is included with "Cash and cash equivalents" in our Consolidated Statement of Financial Position. There was collateral that we are not permitted to sell or repledge and there are no securities lending transactions that extend beyond one year from the reporting date.
If we have to return cash collateral on short notice, we may have difficulty selling investments in a timely manner, be forced to sell them for less than we otherwise would have been able to realize, or both. In addition, in the event of such forced sale, for securities in an unrealized loss position, realized losses would be incurred on securities sold and impairments would be incurred, if there is a need to sell securities prior to recovery, which may negatively impact our financial condition.
Note 8.
| | $ | | |
| Land, buildings, and building improvements | | | | | | |
| Equipment | | | | | | |
| Furniture and fixtures | | | | | | |
| Leasehold improvements | | | | | | |
| Construction in progress | | | | | | |
| Projects in progress | | | | | | |
| Total fixed assets, gross | | | | | | |
| Less: Accumulated depreciation and amortization | | () | | | () | |
| Fixed assets, net | | $ | | | | $ | | |
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.
million, $ million and $ million for the years ended December 31, 2024, 2023 and 2022, respectively, and is included in total operating expenses. The Exchange and its insurance subsidiaries reimbursed us for approximately %, % and % in 2024, 2023 and 2022, respectively, for annual depreciation and amortization expense on assets supporting administrative services.
Note 9.
million bank revolving line of credit with a $ million letter of credit sublimit that expires on November 1, 2029. As of December 31, 2024, 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, 2024. Investments with a fair value of $ million were pledged as collateral on the line of credit at December 31, 2024. These investments have no trading restrictions and are reported as available-for-sale securities and cash and cash equivalents on our Consolidated Statement of Financial Position as of December 31, 2024. The bank requires compliance with certain covenants, which include leverage ratios and debt restrictions. We are in compliance with all covenants at December 31, 2024.
Note 10.
% of the annual defined benefit pension income, and the Exchange and its insurance 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 insurance 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 | | () | | | () | | | | | |
Settlement gain (1) | | () | | | | | | | | |
Pension plan (income) cost (2) | | $ | () | | | $ | () | | | $ | | | |
(1) Settlement accounting was required due to lump sum payments made under the SERP to former officers in 2024.
(2) Pension plan (income) cost represents total plan (income) cost before reimbursements between Indemnity and the Exchange and its insurance subsidiaries. The components of pension plan (income) cost other than the service cost components are included in the line item "Other income" in the Consolidated Statements of Operations, net of reimbursements between Indemnity and the Exchange and its insurance subsidiaries.
Actuarial assumptions
% | | | % | | | Expected return on assets | | | | | | | |
| Rate of compensation increase – age-graded | | | | | | | |
| | | |
| SERP: | | | | | |
| Discount rate | | | % | | | % | |
| Rate of compensation increase | | | | | | | |
% | | | % | | | % | | | Expected return on assets | | | | | | | | | | |
| Rate of compensation increase – age-graded | | | | | | | | | | |
|
| SERP: | | | | | | | |
Discount rate (1) | | | % | | | % | | | % | |
| Rate of compensation increase | | | | | | | | | | |
(1) Settlement accounting was required due to lump sum payments made under the SERP in 2024. The discount rates in effect at the January 1, June 1, and September 1 measurement dates were %, %, and %, respectively.
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 2023 and a $ million contribution during 2024. We also made a contribution of $ million in January 2025. The pension asset is presented separately from the unfunded plan as a non-current asset on the Consolidated Statements of Financial Position.
) | | $ | | | | | | | | | |
| 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.
| | $ | | | |
| Service cost for benefits earned | | | | | | | |
| Interest cost on benefit obligation | | | | | | | |
| Plan amendments | | | | | | | |
Actuarial (gain) loss | | () | | | | | |
| Benefits paid | | () | | | () | | |
Settlements | | () | | | | | |
| Projected benefit obligation, end of year | | $ | | | | $ | | | |
| | | | | |
| Accumulated benefit obligation, end of year | | $ | | | | $ | | | |
| | $ | | | |
| | | |
| Plan assets | | | | | | | |
| | $ | | | | | Plan assets | | | | | | | |
Plan assets
| | $ | | | | | Actual return on plan assets | | | | | | | |
| Employer contributions | | | | | | | |
| Benefits paid | | () | | | () | | |
Settlements | | () | | | | | |
| Fair value of plan assets, end of year | | $ | | | | $ | | | |
| | $ | () | | |
| 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) | | | | | | | | | | |
Settlement gain | | | | | | | | | | |
| 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.
% | | | % | | | % | (2) | | % | | | Non-U.S. equity securities | | | | | | | | | | (3) | | | |
| Total equity securities | | | | | | | | | | | | | |
| Debt securities | | | | | | | | | | (4) | | | |
| Other | | | | | | | | | | (5) | | | |
| Total | | | % | | | % | | | % | | | % | |
(1) Changes to the target asset allocation in 2024 were made to reduce investment risk by shifting portfolio assets from equity securities to debt securities.
(2) U.S. equity securities – % seek to achieve excess returns relative to the Russell 3000 Index.
(3) 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.
(4) 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.
(5) Institutional money market fund.
| | $ | | | | $ | | | | $ | | | | $ | | | | Non-U.S. equity securities | | | | | | | | | | | | | | | |
| Total equity securities | | | | | | | | | | | | | | | |
| Debt securities | | | | | | | | | | | | | | | |
| Other | | | | | | | | | | | | | | | |
| Total | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | |
(1) The increase in assets carried at NAV at December 31, 2024, compared to 2023, are due to the changes in the target allocation in 2024.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | |
| | December 31, 2023 |
| | |
| (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
| | 2026 | | | |
| 2027 | | | |
| 2028 | | | |
| 2029 | | | |
| 2030 - 2034 | | | |
% 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 2024, $ million in 2023, and $ million in 2022. The Exchange and its insurance 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, 2024 and 2023.
Note 11.
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 award 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 an 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 performance shares, 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 performance component of 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. Effective April 23, 2024, for performance periods beginning in or after 2024, the plan was amended to also provide for grants of time-vesting restricted shares or units, or phantom shares, including payment of dividends or dividend equivalent credits on the time-vesting awards, based on continued employment for a specified restricted period. The type of award and form of payment, either in shares of our Class A common stock or cash, are determined by the ECDC at the beginning of each performance period, which is generally a period. The ECDC determined for the 2024-2026 performance period that % of the award will be granted in phantom performance shares and % will be granted in time-vesting phantom shares, and the plan awards for the 2023-2025 and 2024-2026 performance periods will be paid in cash.
Participants can elect to defer up to % of the award under the incentive compensation deferral plan. 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 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.
million. At December 31, 2023, the fully vested plan awards for the 2021-2023 performance period totaled $ million and were awarded to participants in June 2024. 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.
The Exchange and its insurance 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 2024, $ million in 2023, and $ million in 2022. The related tax benefits recognized in income were $ million in 2024, $ million in 2023, and $ million in 2022. In 2024, the Exchange and its insurance subsidiaries reimbursed us for approximately % of the awards paid under these plans. At December 31, 2024, 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. 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 2024, the rabbi trust was not required to purchase shares of our common stock in the open market to satisfy the liability for the 2023 AIP and 2021-2023 LTIP performance period awards deferred under the incentive compensation deferral plan, and dividend equivalent credits on rabbi trust shares. 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.
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. The plan includes a maximum of shares that may be issued under the plan and 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 2024, shares at an average price of $ for $ million in 2023 and shares at an average price of $ for $ million in 2022 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.
million in 2024, $ million in 2023 and $ million 2022.
| | $ | | | | $ | | | | 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 2024, 2023 and 2022, funding includes $ million, $ million and $ million, respectively, representing shares held back to satisfy tax withholding on rabbi trust distributions that reduce 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. Effective April 23, 2024, the number of shares of our Class A common stock authorized for grant under the ECP increased from shares to 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.
In 2024, we satisfied the plan liability in cash totaling $ million. In 2023, we purchased Class A shares with an average share price of $ and a market value of $ million to satisfy the plan liability. In 2022, we purchased shares with an average share price of $ and a market value of $ million to satisfy the plan liability. The total compensation charged to operations related to ECP awards was $ million in 2024, $ million in 2023, and $ million in 2022. The increases in 2024 and 2023 compared to the respective prior periods resulted from increases in plan participants and our stock price. The Exchange and its insurance 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 insurance subsidiaries reimbursed us for approximately %, %, and % of the awards paid in 2024, 2023, and 2022 respectively. Unearned compensation expense of $ million is expected to be recognized over a period of .
Note 12.
| | $ | | | | $ | | | | Deferred income tax expense (benefit) | | | | | () | | | | |
|
| Income tax expense | | $ | | | | $ | | | | $ | | |
| | $ | | | | $ | | | |
|
|
| Other, net | | () | | | () | | | () | |
| Income tax expense | | $ | | | | $ | | | | $ | | |
|
|
|
|
|
|
|
| | $ | | |
| Allowance for management fee returned on cancelled policies | | | | | | |
| Deferred revenue | | | | | | |
| Unrealized losses on investments | | | | | | |
| | |
| | |
| Current expected credit loss allowance | | | | | | |
| Other | | | | | | |
| Total deferred tax assets | | | | | | |
| Deferred tax liabilities: | | | | |
| Depreciation | | | | | | |
| Pension and other postretirement benefits | | | | | | |
| Prepaid expenses | | | | | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| Other | | | | | | |
| Total deferred tax liabilities | | | | | | |
| Net deferred tax liability | | $ | () | | | $ | () | |
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, 2024 or 2023.
We do not have any unrecognized tax benefit that, if recognized, would affect our effective tax rate as of December 31, 2024 and 2023. Any interest expense related to uncertain tax positions would be recognized in income tax expense.
Tax years ending December 31, 2023, 2022 and 2021 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.
Note 13.
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 2024, 2023 or 2022.
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 Consolidated Statements of Financial Position at total cost based upon trade date. There were shares repurchased under this program during 2024, 2023 or 2022. We had approximately $ million of repurchase authority remaining under this program at December 31, 2024, based upon trade date.
Note 14.
) | $ | () | | $ | () | | | $ | () | | $ | () | | $ | () | | | $ | | | $ | | | $ | | | | OCI (loss) before reclassifications | | | | | | | | | | | | | | | | () | | () | | () | |
| Realized investment losses | | | | | | | | | | | | | | | | | | | | | |
| Impairment losses | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| 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) | | () | | () | | () | | | () | | () | | () | | | | | | | | |
Settlement gain (1) | | () | | () | | () | | | | | | | | | | | | | | | |
| OCI (loss) | | () | | () | | () | | | () | | () | | () | | | | | | | | |
| AOCI (loss), end of year | | $ | () | | $ | () | | $ | () | | | $ | | | $ | | | $ | | | | $ | | | $ | | | $ | | |
| | | | | | | | | | | | |
| Total | | | | | | | | | | | | |
| AOCI (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 10, "Postretirement Benefits", for additional information.
Note 15.
%. The management fee rate charged the Exchange was % in 2024, 2023 and 2022. The Board of Directors elected to maintain the fee at % beginning January 1, 2025.
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 insurance 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.
Shared facilities
The Exchange and its insurance subsidiaries have a service agreement with Indemnity to use space in Indemnity-owned properties. 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 insurance subsidiaries for the use of space totaled $ million, $ million and $ million in 2024, 2023, and 2022, 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 2024, 2023, and 2022, respectively. The Exchange and its insurance 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 2024, 2023, and 2022, respectively.
Other loans receivable
In 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 totaling $ million and $ million as of December 31, 2024 and 2023, respectively, are reported in "Other assets, net" in our Consolidated Statements of Financial Position, with changes in credit loss allowances reported in "Net impairment losses recognized in earnings" in our Consolidated Statements 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.
Note 16.
million and $ million at December 31, 2024 and 2023, respectively, which includes a current expected credit loss allowance of $ million and $ million in 2024 and 2023, respectively.
Note 17.
million. We have committed to fund a minimum of % of each loan executed through this program. As of December 31, 2024, outstanding 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, 2024, 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, 2024.
We also have contingent obligations for guarantees related to certain real estate development projects supporting revitalization efforts in our community. As of December 31, 2024, our maximum potential obligation related to the guarantees is $ million.
Note 18.
| | $ | | | | $ | | | | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
| Depreciation and amortization | | | | | | | | | |
| Deferred income tax expense (benefit) | | | | | () | | | | |
|
| Lease amortization expense | | | | | | | | | |
Losses (gains) and impairment losses on investments | | | | | | | | | |
|
| Loss on disposal of fixed assets | | | | | | | | | |
| Net investment (income) loss | | () | | | | | | | |
| Increase (decrease) in deferred compensation | | | | | | | | () | |
|
| Increase in receivables from affiliates | | () | | | () | | | () | |
| Increase in accrued investment income | | () | | | () | | | () | |
|
Increase in pension asset | | () | | | () | | | | |
| Increase in pension liability | | | | | | | | | |
| (Increase) decrease in prepaid expenses and other assets | | () | | | | | | () | |
| (Decrease) increase in accounts payable and accrued expenses | | () | | | | | | | |
| Increase in commissions payable | | | | | | | | | |
| Increase (decrease) in accrued agent incentive compensation | | | | | () | | | () | |
| Increase in contract liability | | | | | | | | | |
| Net cash provided by operating activities | | $ | | | | $ | | | | $ | | |
Note 19.
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, 2024. 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, 2024.
| | | | | | | | | | | | | | | | | |
| /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 27, 2025 | | February 27, 2025 | | February 27, 2025 | |
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 additional information in the fourth quarter of 2024 that has not already been filed in a Form 8-K.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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, 2024, 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, 2024, 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 consolidated statements of financial position of the Company as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and our report dated February 27, 2025 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 27, 2025
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, 2024.
We have 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 12/31/2024 | | Principal Occupation and Positions for Past Five Years |
| | | | |
| President & Chief Executive Officer: | | | | |
| Timothy G. NeCastro | | 64 | | 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 | | 59 | | Executive Vice President, Secretary and General Counsel since January 2022; Senior Vice President, Secretary and General Counsel, October 2018 through December 2021; Director, EFL, EIC, Flagship, ENY and EPC. |
| | | | |
| Sean D. Dugan | | 56 | | 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. |
| | | | |
| Julie M. Pelkowski | | 55 | | 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 | | 50 | | Executive Vice President, Sales & Products since November 2016. |
| | | | |
| Parthasarathy Srinivasa | | 53 | | 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. |
Appointed Executive Officers: (1) | | | | |
| Cody W. Cook | | 43 | | Senior Vice President, Claims since October 2020; Senior Vice President, Personal Products, April 2017 through October 2020. |
| | | | |
| Sarah J. Shine | | 46 | | Senior Vice President, Experience & Customer Service since May 2024; Senior Vice President, Commercial Products, August 2017 through April 2024. |
(1) As of December 31, 2024, the Company announced appointments of Mr. Cook and Ms. Shine for Executive Vice President roles, but the appointments were not yet effective. Effective January 1, 2025, Mr. Cook became Executive Vice President, Claims and Ms. Shine became Executive Vice President, Experience & Customer Service.
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, 2024.
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, 2024.
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, 2024.
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, 2024.
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
•Consolidated Statements of Operations for the three years ended December 31, 2024, 2023 and 2022
•Consolidated Statements of Comprehensive Income for the three years ended December 31, 2024, 2023 and 2022
•Consolidated Statements of Financial Position as of December 31, 2024 and 2023
•Consolidated Statements of Shareholders' Equity for the three years ended December 31, 2024, 2023 and 2022
•Consolidated Statements of Cash Flows for the three years ended December 31, 2024, 2023 and 2022
•Notes to Consolidated Financial Statements
2. Financial Statement Schedules
All schedules are not required, not applicable, or the information is included in the consolidated financial statements or notes thereto.
ITEM 16. FORM 10-K SUMMARY
None.
EXHIBIT INDEX
(Pursuant to Item 601 of Regulation S-K)
| | | | | | | | |
| Exhibit | | |
| Number | | Description of Exhibit |
| | | |
| 3.1 | | |
| | |
| 3.2 | | |
| | |
| 4.1 | | |
| | |
| 10.1 | | |
| | |
| 10.2 | | |
| | |
| 10.3 | | |
| | |
| 10.4* | | |
| | | |
10.5* | | |
| | |
10.6* | | |
| | |
10.7* | | |
| | |
| 10.8 | | |
| | |
10.9* | | |
| | |
10.10* | | |
| | |
10.11* | | |
| | |
10.12* | | |
| | |
10.13* | | |
| | |
| | | | | | | | |
| Exhibit | | |
| Number | | Description of Exhibit |
| | |
10.14* | | |
| | |
10.15* | | |
| | |
10.16* | | |
| | |
10.17* | | |
| | |
10.18* | | |
| | |
10.19* | | |
| | |
10.20* | | |
| | |
10.21* | | |
| | |
10.22* | | |
| | |
10.23* | | |
| | |
10.24* | | |
| | |
| 10.25 | | |
| | |
10.26 | | |
| | |
| 10.27 | | |
| | |
| 10.28 | | |
| | |
| 10.29 | | |
| | |
| | | | | | | | |
| Exhibit | | |
| Number | | Description of Exhibit |
| | |
| 10.30 | | |
| | |
| 14.1 | | |
| | |
| 14.2 | | |
| | |
| 19.1+ | | |
| | |
| 23+ | | |
| | |
| 31.1+ | | |
| | |
| 31.2+ | | |
| | |
| 32++ | | |
| | |
| 97.1 | | |
| | |
| 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.
|
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 27, 2025 | 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 27, 2025 | /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. | | |
| 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 |
| | | |
| | |
| Thomas B. Hagen, Chairman | | |
| | | |
| | |
| | |
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