ERIE INDEMNITY CO - Quarter Report: 2025 March (Form 10-Q)

)() $ $ )

See accompanying notes to Consolidated Financial Statements.

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ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

Three months ended March 31, 2025 and 2024

(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, 2024

()

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, March 31, 2025

()

Class A common stock

Class B common stock

Additional paid-in-capital

Accumulated other comprehensive loss

Retained earnings

Treasury stock

Deferred compensation

Total shareholders' equity

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, March 31, 2024

()

(1)

(2) incentive compensation deferral plan participants in 2025 and in 2024.

See accompanying notes to Consolidated Financial Statements.

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ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	Three months ended March 31,
	2025	2024
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 recovered

Net cash provided by operating activities

Cash flows from investing activities
Purchase of investments:
Available-for-sale securities	()	()
Equity securities	()	()


Proceeds from investments:
Available-for-sale securities sales
Available-for-sale securities maturities/calls
Equity securities


Purchase of fixed assets	()	()

Loans to agents and others	()	()
Collections on agent and other loans
Net cash used in investing activities	()	()

Cash flows from financing activities


Dividends paid to shareholders	()	()




Net changes in cash collateral for securities lent
Net cash used in financing activities	()	()

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

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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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. The underwriting services we provide include underwriting and policy processing. The remaining services we provide include customer service and administrative support. We also provide information technology services that support all the functions listed above. 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 13, "Concentrations of Credit Risk".

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Note 2.

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Note 3.

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

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

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

period representing the time over which these services are provided. The portion of revenue not yet earned is recorded as a contract liability in the Consolidated Statements of Financial Position. During the three months ended March 31, 2025, we recognized revenue of $ million that was included in the contract liability balance as of December 31, 2024. During the three months ended March 31, 2024, we recognized revenue of $ million that was included in the contract liability balance as of December 31, 2023.

performance obligations for the three months ended March 31:

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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, of Notes to Consolidated Financial Statements" included in our Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the SEC on February 27, 2025.

$ 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 Other income Income tax expense Net income$ $

(1) Management operations segment depreciation and amortization expense included in "Total operating expenses" as reported on our Consolidated Statements of Operations totaled $ million and $ million for the three months ended March 31, 2025 and 2024, respectively. The Exchange and its insurance subsidiaries reimbursed us for approximately % and % in the three months ended March 31, 2025 and 2024, respectively, for depreciation and amortization expense on assets supporting administrative services. See our Consolidated Statements of Cash Flows for segment expenditures on fixed asset additions.

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Note 5.

to 1. See Note 11, "Capital Stock".

Class A diluted earnings per share is 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.

$ $ $ 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 and diluted EPS:Income available to Class B stockholders$ $ $ $

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Note 6.

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Financial services sector (2)

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.

(2)This includes $ million of securities lent under a securities lending agreement.

December 31, 2024

(in thousands)

Total

Level 1

Level 2

Level 3

Available-for-sale securities:

Corporate debt securities (1)

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.

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

Level 3 Assets – 2024 Year-to-Date Change:

(in thousands)

Beginning balance at December 31, 2023

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 March 31, 2024

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.

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Note 7.

$ $ $ Collateralized debt obligations Commercial mortgage-backed securities Residential mortgage-backed securities Other debt securities U.S. Treasury 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, 2024

(in thousands)

Amortized cost

Gross unrealized gains

Gross unrealized losses

Estimated fair value

Available-for-sale securities:

Corporate debt securities (1)

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 available-for-sale securities, net

(1)This includes an estimated fair value of $ million of securities lent under a securities lending agreement.

$ 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 March 31, 2025.

(2)This includes an estimated fair value of $ million of securities lent under a securities lending agreement.

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

December 31, 2024

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

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$ $ $ Provision and recoveries Sales/collections and write-offs() Balance, end of period$ $ $ $


	2024
(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	$	$	$	$

(in thousands)

(in thousands)))

(in thousands)

(in thousands))) ))

) )) $()

(1)Settlement accounting was required due to lump sum payments made under the SERP to former officers in 2025 and 2024.

(2)Pension plan cost (income) represents total plan cost (income) before reimbursements between Indemnity and the Exchange and its insurance subsidiaries. The components of pension plan cost (income) 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.

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Note 10.

Note 11.

Class A shares per Class B share. There were shares of Class B common stock converted into Class A common stock during the three months ended March 31, 2025 and the year ended December 31, 2024. There is no provision for conversion of Class A shares into Class B shares, and Class B shares surrendered for conversion cannot be reissued.

Stock repurchases

In 2011, our Board of Directors approved a continuation of the current stock repurchase program of $ million, with no time limitation. There were shares repurchased under this program during the three months ended March 31, 2025 and the year ended December 31, 2024. We had approximately $ million of repurchase authority remaining under this program at March 31, 2025.

Note 12.

)$()$()$()$()$()OCI (loss) before reclassifications ()()()Realized investment losses Impairment losses

OCI (loss)

()()()AOCI (loss), end of period$()$()$()$()$()$()Pension and other postretirement plans:

AOCI (loss), beginning of period

$()$()$()$ $ $ Amortization of prior service costs Amortization of net actuarial gain()()()()()()Settlement gain()()() OCI (loss)()()()()()()

AOCI (loss), end of period

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

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Note 13.

million and $ million at March 31, 2025 and December 31, 2024, respectively, which includes a current expected credit loss allowance of $ million in both periods.

Note 14.

million. We have committed to fund a minimum of % of each loan executed through this program. As of March 31, 2025, 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 March 31, 2025, our maximum potential amount of future payments on the guaranteed portion is $ million. All loan payments under the participation program are current as of March 31, 2025.

We also have contingent obligations for guarantees related to certain real estate development projects supporting revitalization efforts in our community. As of March 31, 2025, our maximum potential obligation related to guarantees is $ million.

Note 15.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of financial condition and results of operations highlights significant factors influencing Erie Indemnity Company ("Indemnity", "we", "us", "our"). This discussion should be read in conjunction with the historical consolidated financial statements and the related notes thereto included in Part I, Item 1. "Financial Statements" of this Quarterly Report on Form 10-Q, and with Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" for the year ended December 31, 2024, as contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2025.

INDEX


	Page Number
Cautionary Statement Regarding Forward-Looking Information	23
Recent Accounting Standards and Disclosure Rules	24
Operating Overview	24
Results of Operations	27
Financial Condition	33
Liquidity and Capital Resources	34



		15,079			29.6

2.65			$	2.38		11.1	%

(10)NM133,731$121,8789.7 %

502 $1,853

Net realized and unrealized gains of $0.5 million during the first quarter of 2025 were primarily due to market value adjustments on equity securities, partially offset by losses on disposals of available-for-sale securities. Net realized and unrealized gains of $1.9 million during the same period in 2024 were primarily due to market value adjustments on equity securities.

Net impairment losses recognized in earnings

Net impairment losses of $0.9 million in the first quarter of 2025 include current expected credit losses on other loans receivable and agent loans of $0.5 million as well as credit-related impairments on available-for-sale securities of $0.4 million. Net impairments losses of $2.7 million during the same period in 2024 primarily included $2.2 million of current expected credit losses recognized on held-to-maturity securities as well as intent to sell and credit-related impairments on available-for-sale securities of $0.3.

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Financial Condition of Erie Insurance Exchange

Serving in the capacity of attorney-in-fact for the subscribers at the Exchange, we are dependent on the growth and financial condition of the Exchange, who is our sole customer. The strength of the Exchange and its wholly owned subsidiaries is rated annually by A.M. Best through assessing its financial stability and ability to pay claims. The ratings are generally based upon factors relevant to policyholders and are not directed toward return to investors. The Exchange and each of its property and casualty 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 13.9% to $3.1 billion in the first three months of 2025 compared to the first three months of 2024. 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 $9.2 billion and $9.3 billion at March 31, 2025 and December 31, 2024, respectively. The Exchange and its wholly owned property and casualty insurance subsidiaries' year-over-year policy retention ratio continues to be high at 89.9% at March 31, 2025 and 90.4% at December 31, 2024.

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" included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 as filed with the Securities and Exchange Commission on February 27, 2025 for possible outcomes that could impact that determination.

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FINANCIAL CONDITION

Investments

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


(dollars in thousands)	March 31, 2025		% to total		December 31, 2024		% to total
	(Unaudited)
Available-for-sale securities (1)	$	1,112,707	84	%	$	1,043,615	83	%
Equity securities (2)	81,912		6		85,891		7
Agent loans (3)	98,823		7		92,731		7
Other investments (4)	34,666		3		29,610		3
Total investments	$	1,328,108	100	%	$	1,251,847	100	%

(1)This includes $12.2 million and $7.3 million of securities lent under a securities lending agreement as of March 31, 2025 and December 31, 2024, respectively.

(2)This includes $0.1 million of securities lent under a securities lending agreement as of March 31, 2025.

(3)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.

(4)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.

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 $11.9 million at March 31, 2025, compared to $17.6 million at December 31, 2024.

The following table presents a breakdown of the fair value of our available-for-sale portfolio by industry sector and rating as of:


(in thousands)	March 31, 2025 (1)
	AAA		AA		A		BBB		Non- investment grade		Fair value
	(Unaudited)
Basic materials	$	0	$	0	$	976	$	2,158	$	8,261	$	11,395
Communications	0		6,015		12,638		15,298		11,783		45,734
Consumer	0		1,997		37,477		63,256		47,651		150,381
Diversified	0		0		0		0		829		829
Energy	0		872		5,789		20,159		14,731		41,551
Financial	0		4,302		118,532		137,048		21,234		281,116





Industrial	0		0		6,900		19,112		32,048		58,060
Structured securities (2)	170,957		190,005		25,226		14,762		844		401,794
Technology	1,956		0		0		20,481		15,103		37,540
U.S. Treasury	0		9,135		0		0		0		9,135
Utilities	0		0		13,621		48,916		12,635		75,172
Total	$	172,913	$	212,326	$	221,159	$	341,190	$	165,119	$	1,112,707

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

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

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Equity securities

Equity securities primarily include nonredeemable preferred stocks and are carried at fair value in the 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:


(in thousands)	March 31, 2025		December 31, 2024
	(Unaudited)
Financial services	$	67,776	$	69,930

Utilities	4,229		5,629
Energy	2,995		4,117
Consumer	4,037		3,341
Technology	1,974		1,974

Communications	901		900



Total	$	81,912	$	85,891

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 tariff, inflationary and interest rate environment. While we did not see a significant impact on our sources or uses of cash in the first quarter of 2025, 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 2029. See broader discussions of potential risks to our operations in the Operating Overview contained within this report and Part I. Item 1A. "Risk Factors" included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 as filed with the Securities and Exchange Commission on February 27, 2025.

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. See Part I, Item 1. "Financial Statements - Note 9, Postretirement Benefits, of Notes to Consolidated Financial Statements" contained within this report for the funding policy and related contribution for our defined benefit pension plan. 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 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 do 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.

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Cash flow activities

The following table provides condensed cash flow information as follows for the three months ended March 31:




(in thousands)	2025		2024
	(Unaudited)
Net cash provided by operating activities	$	118,118	$	87,193
Net cash used in investing activities	(97,760)		(26,999)
Net cash used in financing activities	(58,376)		(59,377)
Net (decrease) increase in cash, cash equivalents and restricted cash	$	(38,018)	$	817

Net cash provided by operating activities was $118.1 million in the first three months of 2025, compared to $87.2 million for the same period in 2024. Increased cash provided by operating activities was primarily due to an increase in management fees received of $96.3 million driven by growth in direct and affiliated assumed premiums written by the Exchange. This was partially offset by an increase in cash paid for agent commissions of $55.5 million driven by premium growth, and increases in incentive compensation paid to agents of $6.6 million and pension and employee benefits paid of $6.1 million due to higher pension contributions. Pension contributions totaled $39.0 million in 2025 compared to $33.0 million in 2024.

Net cash used in investing activities was $97.8 million in the first three months of 2025, compared to $27.0 million for the same period in 2024. Increased cash used in investing activities was primarily due to an increase in purchases of available-for-sale securities of $53.8 million and loans to agents and others of $10.1 million.

Net cash used in financing activities was $58.4 million in the first three months of 2025, compared to $59.4 million for the same period in 2024, primarily due to dividends paid to shareholders. We increased both our Class A and Class B shareholder regular quarterly dividends by 7.1% for 2025, compared to 2024. There are no regulatory restrictions on the payment of dividends to our shareholders.

Capital Outlook

We regularly prepare forecasts evaluating the current and future cash requirements for both normal and extreme risk events. 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 $232.8 million at March 31, 2025, 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 $892.7 million at March 31, 2025. 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 Part I, Item 1. "Financial Statements - Note 8, 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 Part I, Item 1. "Financial Statements - Note 14, Commitments and Contingencies, of Notes to Consolidated Financial Statements" contained within this report 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.

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CRITICAL ACCOUNTING ESTIMATES

We make estimates and assumptions that have a significant effect on the amounts and disclosures reported in the consolidated financial statements. The most significant estimates relate to investment valuation and retirement benefit plans for employees. While management believes its estimates are appropriate, the ultimate amounts may differ from estimates provided. Our most critical accounting estimates are described in Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" for the year ended December 31, 2024 of our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on February 27, 2025. See Part I, Item 1. "Financial Statements - Note 6, Fair Value, of Notes to Consolidated Financial Statements" contained within this report for additional information on our valuation of investments.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk is primarily related to fluctuations in interest rates and prices. Quantitative and qualitative disclosures about market risk resulting from changes in interest rates, prices and other risk exposures for the year ended December 31, 2024 are included in Item 7A. "Quantitative and Qualitative Disclosures About Market Risk" of our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on February 27, 2025.

The uncertain tariff, inflationary and interest rate environment, ongoing geopolitical risks and a potential economic slowdown may create future volatility; however, there have been no material changes that impacted our portfolio or reshaped our periodic investment reviews of asset allocations during the three months ended March 31, 2025. We continue to closely monitor the economic environment and financial markets and will take appropriate measures, when necessary, to minimize potential risk exposure to our cash and investment balances. For a recent discussion of conditions surrounding our investment portfolio, see the "Operating Overview", "Results of Operations" and "Financial Condition" discussions contained in Part I, Item 2. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" contained within this report.

ITEM 4. CONTROLS AND PROCEDURES

We carried out an evaluation, with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (pursuant to Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

Our management evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer, any change in our internal control over financial reporting and determined there has been no change in our internal control over financial reporting during the three months ended March 31, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Erie Indemnity Company ("Indemnity") was named as a defendant in a complaint filed on August 24, 2021, by alleged subscribers of the Erie Insurance Exchange (the "Exchange") in the Court of Common Pleas Civil Division of Allegheny County, Pennsylvania captioned TROY STEPHENSON, CHRISTINA STEPHENSON, SUSAN RUBEL and STEVEN BARNETT, individually and on behalf of all others similarly situated (Plaintiffs) v. Erie Indemnity Company (Defendant).

The complaint seeks relief for alleged breaches of fiduciary duty by Indemnity in connection with the setting of the management fee it receives, in accordance with the terms of the Subscribers Agreement executed between Indemnity and all policyholders of the Exchange, as compensation for acting as the attorney-in-fact in the management of the Exchange. The relief sought is for the period beginning two years prior to the date of the filing of the complaint and continuing through 2021.

The complaint seeks (i) a finding that Indemnity has breached its fiduciary duties; (ii) an award of damages in an amount to be determined at trial; and (iii) such other relief, including disgorgement of profits or other injunctive relief, that the Court deems just and proper.

Service of the complaint was effectuated on September 20, 2021. A Notice of Removal to the United States District Court for the Western District of Pennsylvania was filed on October 20, 2021. On November 2, 2021, Plaintiffs filed a Notice of Voluntary Dismissal. As a result, the action was dismissed without prejudice.

On December 6, 2021, another Complaint was filed in the Court of Common Pleas of Allegheny County, Pennsylvania captioned ERIE INSURANCE EXCHANGE, an unincorporated association, by TROY STEPHENSON, CHRISTINA STEPHENSON and STEVEN BARNETT, trustees ad litem, and alternatively, ERIE INSURANCE EXCHANGE, by TROY STEPHENSON, CHRISTINA STEPHENSON and STEVEN BARNETT, (Plaintiff), v. ERIE INDEMNITY COMPANY, (Defendant).

This most recent complaint has the same allegation of breach of fiduciary duty by Indemnity in connection with the setting of the management fee it receives, in accordance with the terms of the Subscribers Agreement executed between Indemnity and all policyholders of the Exchange, as compensation for acting as the attorney-in-fact in the management of the Exchange.

This most recent complaint seeks the same relief, specifically, (i) a finding that Indemnity has breached its fiduciary duties; (ii) an award of damages in an amount to be determined at trial; and (iii) such other relief, including disgorgement of profits or other injunctive relief, that the Court deems just and proper.

A Notice of Removal to the United States District Court for the Western District of Pennsylvania was filed on January 27, 2022. Indemnity intends to vigorously defend against all of the allegations and requests for relief in the complaint.

By Memorandum Opinion and Order dated September 28, 2022, the Court granted the Motion for Remand and directed the case be remanded to the Court of Common Pleas of Allegheny County, Pennsylvania. On September 30, 2022, Indemnity filed a Motion to Stay the Remand Order pending an appeal to the United States Court of Appeals for the Third Circuit. On October 3, 2022, the Court granted the Stay. On October 11, 2022, Indemnity filed a Petition for Permission to Appeal the Remand Order with the Third Circuit. By Order dated November 7, 2022, a three judge panel of the Court denied the Petition to Appeal.

On November 21, 2022, Indemnity filed a Petition for Rehearing requesting that the Third Circuit permit the appeal. By Order dated January 9, 2023, the Court granted the petition for rehearing and vacated the prior Order of October 7, 2022, denying permission to appeal. On April 20, 2023, argument was held before a three-judge panel of the Third Circuit. By Opinion dated May 22, 2023, the Court affirmed the decision of the District Court finding that there was no basis for federal court jurisdiction and that the matter had been properly remanded to state court. On June 5, 2023, Indemnity filed a Petition for Panel Rehearing or Rehearing En Banc. By Order dated June 22, 2023, the Court denied the Petition. The United States District Court thereafter extended its stay of the issuance of the remand order through the conclusion of any proceedings in the United States Supreme Court challenging the decision of the United States Court of Appeals for the Third Circuit that no federal jurisdiction exists in this case.

On October 20, 2023, Indemnity filed a Petition for Writ of Certiorari with the Supreme Court of the United States. The Petition sought a determination from the Court that the lower courts improperly denied federal jurisdiction. By order dated February 26, 2024, the United States Supreme Court denied Indemnity's Petition for Writ of Certiorari.

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Separately, Indemnity filed a Complaint in Federal Court to invoke certain provisions of the “All Writs Act” and the “Anti-Injunction Act.” By filing this complaint, Indemnity seeks to protect the federal court’s prior binding, final judgments in favor of Indemnity and thereby foreclose further litigation of the claims and issues pertaining to the compensation practices that were the subject of the prior judgments. After the denial of certiorari, the district court, by Opinion and Order dated February 28, 2024, granted Indemnity’s motion for a preliminary injunction under the All Writs Act after determining that the gravamen of the plaintiff’s state court action “is the same” as two actions previously dismissed in federal court, that Indemnity would be irreparably harmed if it is forced to relitigate those same issues in state court, plaintiffs had a full and fair opportunity to litigate the same issues in prior litigation, and that an injunction would serve the public interest. The Court’s order preliminarily enjoined the named plaintiffs from pursuing the Erie Ins. Exch. v. Erie Indem. Co. action and enjoined the state court from conducting further proceedings in that action. The court ordered Indemnity to file a motion to convert the preliminary injunction into a permanent injunction. In the meantime, plaintiffs filed a Notice of Appeal with the United States Court of Appeals for the Third Circuit. As a result of the filing of the appeal, the trial court stayed the order issuing an injunction.

The appeal has been briefed and oral argument was held on October 29, 2024, before a three-judge panel of the Third Circuit. The parties are currently awaiting a decision.

Indemnity intends to vigorously defend the district court’s order on appeal and to otherwise defend against all allegations and requests for relief sought by plaintiffs.

For additional information on contingencies, see Part I, Item 1. "Financial Statements - Note 14, Commitment and Contingencies, of Notes to Consolidated Financial Statements".

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 as filed with the Securities and Exchange Commission on February 27, 2025.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

In 2011, our Board of Directors approved a continuation of the current stock repurchase program, authorizing repurchases for a total of $150 million with no time limitation. This repurchase authority included, and was not in addition to, any unspent amounts remaining under the prior authorization.

The following table provides information regarding our Class A nonvoting common stock share repurchases during the quarter ending March 31, 2025:


(dollars in thousands, except per share data)
Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced program	Dollar value of shares that may yet be purchased under the program

January 1-31, 2025 (1)	1,626	$	379.88	—	$	17,754
February 1-28, 2025	—	—		—	17,754
March 1-31, 2025 (1)	3,268	446.47		—	17,754
Total	4,894	424.35		—

(1)Represents shares purchased on the open market for stock-based awards in conjunction with our equity compensation plan.

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ITEM 6. EXHIBITS


Exhibit
Number						Description of Exhibit

10.1						Form of Indemnification Agreement by and between Erie Indemnity Company and Cody Cook. Such exhibit is incorporated by reference to Exhibit 10.108 in the Registrant's Form 10-K that was filed with the Commission on February 26 , 2009.

10.2						Form of Indemnification Agreement by and between Erie Indemnity Company and Sarah Shine . Such exhibit is incorporated by reference to Exhibit 10.108 in the Registrant's Form 10-K that was filed with the Commission on February 2 6, 2 009.

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

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

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

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).

+ Filed herewith.

++ Furnished herewith.

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SIGNATURES

Pursuant to the requirements 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.

Erie Indemnity Company

(Registrant)

Date:

April 24, 2025

By:

/s/ Timothy G. NeCastro

Timothy G. NeCastro, President & CEO

By:

/s/ Julie M. Pelkowski

Julie M. Pelkowski, Executive Vice President & CFO

ERIE INDEMNITY CO - Quarter Report: 2025 March (Form 10-Q)

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