UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2023~~March 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from___to___

Commission file number 0-24000


			ERIE INDEMNITY COMPANY
			(Exact name of registrant as specified in its charter)

Pennsylvania

25-0466020

(State or other jurisdiction of

(IRS Employer

incorporation or organization)

Identification No.)

100 Erie Insurance Place,

Erie,

Pennsylvania

16530

(Address of principal executive offices)

(Zip Code)


			814			870-2000
			(Registrant’s telephone number, including area code)


			Not applicable
			(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Class A common stock,

stated value $0.0292 per share

ERIE

NASDAQ Stock Market, LLC

(Title of each class)

(Trading Symbol)

(Name of each exchange on which registered)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s Class A Common Stock as of the latest practicable date was 46,189,068 at ~~October 20, 2023.~~April 19, 2024.

The number of shares outstanding of the registrant’s Class B Common Stock as of the latest practicable date was 2,542 at ~~October 20, 2023.~~April 19, 2024.

Table of Contents


PART I.			FINANCIAL INFORMATION

Item 1.			Financial Statements (Unaudited)

			Statements of Operations – Three ~~and~~ ~~nine~~months ended ~~Sep~~March 31 ~~tember~~, 202 4 ~~30, 2023~~ and ~~2022~~202 3

			Statements of Comprehensive Income – Three ~~and~~ ~~nine~~months ended ~~September~~ ~~30,~~March 31, 2024 and 2023 ~~and 2022~~

			Statements of Financial Position – ~~September~~March ~~30, 2023~~3 1 , 202 4 and December 31, ~~2022~~202 3

			Statements of Shareholders' Equity – Three ~~and~~ ~~nine~~months ended ~~September~~ ~~30,~~March 31, 2024 and 2023 ~~and 2022~~

			Statements of Cash Flows – ~~Nine~~Three months ended ~~September~~ ~~30,~~March 31, 2024 and 2023 ~~and 2022~~

			Notes to Financial Statements – SeMarch 31 ~~ptember~~ , 202 ~~30, 2023~~4

Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.			Quantitative and Qualitative Disclosures About Market Risk

Item 4.			Controls and Procedures


PART II.			OTHER INFORMATION

Item 1.			Legal Proceedings

Item 1A.			Risk Factors

Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds



Item 6.			Exhibits


			SIGNATURES

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ERIE INDEMNITY COMPANY

STATEMENTS OF OPERATIONS (UNAUDITED)

(dollars in thousands, except per share data)


		Three months ended				Nine months ended
		September 30,				September 30,
		2023		2022		2023		2022
		Three months ended
		Three months ended
		Three months ended
		March 31,
		March 31,
		March 31,
		2024
		2024
		2024
Operating revenue
Operating revenue
Operating revenue	Operating revenue
Management fee revenue - policy issuance and renewal services	Management fee revenue - policy issuance and renewal services	$	649,049	$	551,666	$	1,840,478	$	1,584,213
Management fee revenue - policy issuance and renewal services
Management fee revenue - policy issuance and renewal services
Management fee revenue - administrative services
Management fee revenue - administrative services
Management fee revenue - administrative services	Management fee revenue - administrative services	16,151		14,657		46,976		43,446
Administrative services reimbursement revenue	Administrative services reimbursement revenue	187,118		168,653		544,411		492,655
Administrative services reimbursement revenue
Administrative services reimbursement revenue
Service agreement revenue	Service agreement revenue	6,620		6,260		19,408		19,175
Service agreement revenue
Service agreement revenue
Total operating revenue
Total operating revenue
Total operating revenue	Total operating revenue	858,938		741,236		2,451,273		2,139,489

Operating expenses	Operating expenses

Operating expenses

Operating expenses
Cost of operations - policy issuance and renewal services	Cost of operations - policy issuance and renewal services	523,349		466,111		1,513,690		1,352,050
Cost of operations - policy issuance and renewal services
Cost of operations - policy issuance and renewal services
Cost of operations - administrative services
Cost of operations - administrative services
Cost of operations - administrative services	Cost of operations - administrative services	187,118		168,653		544,411		492,655

Total operating expenses	Total operating expenses	710,467		634,764		2,058,101		1,844,705

Total operating expenses

Total operating expenses
Operating income
Operating income
Operating income	Operating income	148,471		106,472		393,172		294,784

Investment income	Investment income

Investment income

Investment income
Net investment income	Net investment income	14,642		5,834		30,360		24,606
Net realized and unrealized investment losses		(2,227)		(6,230)		(9,246)		(23,833)
Net investment income
Net investment income
Net realized and unrealized investment gains (losses)
Net realized and unrealized investment gains (losses)
Net realized and unrealized investment gains (losses)
Net impairment losses recognized in earnings
Net impairment losses recognized in earnings
Net impairment losses recognized in earnings	Net impairment losses recognized in earnings	(113)		(175)		(1,917)		(429)

Total investment income (loss)	Total investment income (loss)	12,302		(571)		19,197		344

Interest expense		—		115		—		2,009
Total investment income (loss)

Total investment income (loss)

Other income

Other income

Other income	Other income	3,001		562		9,643		1,372
Income before income taxes	Income before income taxes	163,774		106,348		422,012		294,491
Income before income taxes
Income before income taxes
Income tax expense	Income tax expense	32,734		22,035		86,879		61,412
Income tax expense
Income tax expense
Net income
Net income
Net income	Net income	$	131,040	$	84,313	$	335,133	$	233,079

Net income per share	Net income per share

Net income per share

Net income per share
Class A common stock – basic
Class A common stock – basic
Class A common stock – basic	Class A common stock – basic	$	2.81	$	1.81	$	7.20	$	5.00
Class A common stock – diluted	Class A common stock – diluted	$	2.51	$	1.61	$	6.41	$	4.46
Class A common stock – diluted
Class A common stock – diluted
Class B common stock – basic and diluted
Class B common stock – basic and diluted
Class B common stock – basic and diluted	Class B common stock – basic and diluted	$	422	$	272	$	1,079	$	751

Weighted average shares outstanding – Basic	Weighted average shares outstanding – Basic

Weighted average shares outstanding – Basic

Weighted average shares outstanding – Basic
Class A common stock	Class A common stock	46,189,037		46,189,025		46,188,962		46,188,878
Class A common stock
Class A common stock
Class B common stock
Class B common stock
Class B common stock	Class B common stock	2,542		2,542		2,542		2,542

Weighted average shares outstanding – Diluted	Weighted average shares outstanding – Diluted

Weighted average shares outstanding – Diluted

Weighted average shares outstanding – Diluted
Class A common stock	Class A common stock	52,299,369		52,296,411		52,298,655		52,297,685
Class A common stock
Class A common stock
Class B common stock
Class B common stock
Class B common stock	Class B common stock	2,542		2,542		2,542		2,542

Dividends declared per share	Dividends declared per share

Dividends declared per share

Dividends declared per share
Class A common stock
Class A common stock
Class A common stock	Class A common stock	$	1.19	$	1.11	$	3.57	$	3.33
Class B common stock	Class B common stock	$	178.50	$	166.50	$	535.50	$	499.50
Class B common stock
Class B common stock

See accompanying notes to Financial Statements. See Note 11, "Accumulated Other Comprehensive Income (Loss)", for amounts reclassified out of accumulated other comprehensive income (loss) into the Statements of Operations.

Table of Contents

ERIE INDEMNITY COMPANY

STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)


		Three months ended				Nine months ended
		September 30,				September 30,
		2023		2022		2023		2022
		Three months ended
		Three months ended
		Three months ended
		March 31,
		March 31,
		March 31,
		2024
		2024
		2024
Net income
Net income
Net income	Net income	$	131,040	$	84,313	$	335,133	$	233,079

Other comprehensive loss, net of tax
Other comprehensive (loss) income, net of tax

Other comprehensive (loss) income, net of tax

Other comprehensive (loss) income, net of tax
Change in unrealized holding (losses) gains on available-for-sale securities	Change in unrealized holding (losses) gains on available-for-sale securities	(5,902)		(17,178)		2,846		(69,082)
Amortization of prior service costs and net actuarial (gain) loss on pension and other postretirement plans		(2,742)		1,731		(8,226)		5,198
Total other comprehensive loss, net of tax		(8,644)		(15,447)		(5,380)		(63,884)
Change in unrealized holding (losses) gains on available-for-sale securities
Change in unrealized holding (losses) gains on available-for-sale securities
Amortization of prior service costs and net actuarial gain on pension and other postretirement plans
Amortization of prior service costs and net actuarial gain on pension and other postretirement plans
Amortization of prior service costs and net actuarial gain on pension and other postretirement plans
Total other comprehensive (loss) income, net of tax
Total other comprehensive (loss) income, net of tax
Total other comprehensive (loss) income, net of tax
Comprehensive income	Comprehensive income	$	122,396	$	68,866	$	329,753	$	169,195
Comprehensive income
Comprehensive income

Table of Contents

ERIE INDEMNITY COMPANY

STATEMENTS OF FINANCIAL POSITION

(dollars in thousands, except per share data)


		September 30,		December 31,
		2023		2022
	March 31,					March 31,	December 31,
	2024					2024	2023
Assets	Assets	(Unaudited)
Current assets:	Current assets:
Cash and cash equivalents		$	102,873	$	142,090
Current assets:
Current assets:
Cash and cash equivalents (includes restricted cash of $13,331 and $12,542, respectively)
Cash and cash equivalents (includes restricted cash of $13,331 and $12,542, respectively)
Cash and cash equivalents (includes restricted cash of $13,331 and $12,542, respectively)
Available-for-sale securities	Available-for-sale securities	69,822		24,267

Receivables from Erie Insurance Exchange and affiliates, net
Receivables from Erie Insurance Exchange and affiliates, net
Receivables from Erie Insurance Exchange and affiliates, net	Receivables from Erie Insurance Exchange and affiliates, net	620,683		524,937
Prepaid expenses and other current assets	Prepaid expenses and other current assets	71,480		79,201

Accrued investment income	Accrued investment income	8,968		8,301
Accrued investment income
Accrued investment income
Total current assets	Total current assets	873,826		778,796

Available-for-sale securities, net
Available-for-sale securities, net
Available-for-sale securities, net	Available-for-sale securities, net	845,415		870,394
Equity securities	Equity securities	79,516		72,560

Fixed assets, net	Fixed assets, net	434,975		413,874
Fixed assets, net
Fixed assets, net
Agent loans, net	Agent loans, net	59,544		60,537

Defined benefit pension plan	Defined benefit pension plan	65,163		0
Defined benefit pension plan
Defined benefit pension plan

Other assets		36,110		43,295
Other assets, net
Other assets, net
Other assets, net
Total assets	Total assets	$	2,394,549	$	2,239,456

Liabilities and shareholders' equity	Liabilities and shareholders' equity
Liabilities and shareholders' equity
Liabilities and shareholders' equity
Current liabilities:
Current liabilities:
Current liabilities:	Current liabilities:
Commissions payable	Commissions payable	$	357,614	$	300,028
Agent bonuses		50,252		95,166
Commissions payable
Commissions payable
Agent incentive compensation
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	165,797		165,915
Dividends payable	Dividends payable	55,419		55,419
Contract liability	Contract liability	40,831		36,547
Deferred executive compensation	Deferred executive compensation	11,000		12,036

Total current liabilities	Total current liabilities	680,913		665,111

Defined benefit pension plans		27,744		51,224

Total current liabilities

Total current liabilities

Defined benefit pension plan
Defined benefit pension plan
Defined benefit pension plan

Contract liability
Contract liability
Contract liability	Contract liability	19,653		17,895
Deferred executive compensation	Deferred executive compensation	18,547		13,724
Deferred income taxes, net	Deferred income taxes, net	11,045		14,075
Other long-term liabilities	Other long-term liabilities	24,758		29,019
Total liabilities	Total liabilities	782,660		791,048

Shareholders’ equity	Shareholders’ equity
Shareholders’ equity
Shareholders’ equity
Class A common stock, stated value $0.0292 per share; 74,996,930 shares authorized; 68,299,200 shares issued; 46,189,068 shares outstanding
Class A common stock, stated value $0.0292 per share; 74,996,930 shares authorized; 68,299,200 shares issued; 46,189,068 shares outstanding
Class A common stock, stated value $0.0292 per share; 74,996,930 shares authorized; 68,299,200 shares issued; 46,189,068 shares outstanding	Class A common stock, stated value $0.0292 per share; 74,996,930 shares authorized; 68,299,200 shares issued; 46,189,068 shares outstanding	1,992		1,992
Class B common stock, convertible at a rate of 2,400 Class A shares for one Class B share, stated value $70 per share; 3,070 shares authorized; 2,542 shares issued and outstanding	Class B common stock, convertible at a rate of 2,400 Class A shares for one Class B share, stated value $70 per share; 3,070 shares authorized; 2,542 shares issued and outstanding	178		178
Additional paid-in-capital	Additional paid-in-capital	16,466		16,481
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(12,794)		(7,414)
Retained earnings	Retained earnings	2,752,137		2,583,261

Total contributed capital and retained earnings	Total contributed capital and retained earnings	2,757,979		2,594,498
Total contributed capital and retained earnings
Total contributed capital and retained earnings
Treasury stock, at cost; 22,110,132 shares held	Treasury stock, at cost; 22,110,132 shares held	(1,168,761)		(1,168,949)
Deferred compensation	Deferred compensation	22,671		22,859
Total shareholders’ equity	Total shareholders’ equity	1,611,889		1,448,408
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	2,394,549	$	2,239,456

See accompanying notes to Financial Statements.

Table of Contents

ERIE INDEMNITY COMPANY

STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

Three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023

(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, 2022 $ 1,992 $ 178 $ 16,481 $ (7,414) $ 2,583,261 $ (1,168,949) $ 22,859 $ 1,448,408
Net income 86,241 86,241
Other comprehensive income 7,752 7,752
Dividends declared:
Class A $1.19 per share (54,965) (54,965)
Class B $178.50 per share (454) (454)
Net purchase of treasury stock (1)
(15) 0 (15)
Deferred compensation (822) 822 0
Rabbi trust distribution (2)
416 (416) 0
Balance, March 31, 2023 $ 1,992 $ 178 $ 16,466 $ 338 $ 2,614,083 $ (1,169,355) $ 23,265 $ 1,486,967
Net income 117,852 117,852
Other comprehensive loss (4,488) (4,488)
Dividends declared:
Class A $1.19 per share (54,965) (54,965)
Class B $178.50 per share (454) (454)
Net purchase of treasury stock (1)
0 0 0
Deferred compensation (621) 621 0
Rabbi trust distribution (2)
1,596 (1,596) 0
Balance, June 30, 2023 $ 1,992 $ 178 $ 16,466 $ (4,150) $ 2,676,516 $ (1,168,380) $ 22,290 $ 1,544,912
Net income 131,040 131,040
Other comprehensive loss (8,644) (8,644)
Dividends declared:
Class A $1.19 per share (54,965) (54,965)
Class B $178.50 per share (454) (454)
Net purchase of treasury stock (1)
0 0 0
Deferred compensation (381) 381 0
Balance, September 30, 2023 $ 1,992 $ 178 $ 16,466 $ (12,794) $ 2,752,137 $ (1,168,761) $ 22,671 $ 1,611,889


	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	$	1,992	$	178	$	16,466	$	(13,400)	$	2,803,689	$	(1,169,165)	$	23,075	$	1,662,835

Net income									124,552						124,552
Other comprehensive loss							(1,830)								(1,830)
Dividends declared:
Class A $1.275 per share									(58,891)						(58,891)
Class B $191.25 per share									(486)						(486)

Deferred compensation											(861)		861		0
Rabbi trust distribution (1)											709		(709)		0
Balance, March 31, 2024	$	1,992	$	178	$	16,466	$	(15,230)	$	2,868,864	$	(1,169,317)	$	23,227	$	1,726,180

~~(1) Net purchases of treasury stock in 2023 include the repurchase of our Class A common stock in the open market that were subsequently distributed to satisfy stock-based compensation awards.~~

~~(2)~~


	Class A common stock		Class B common stock		Additional paid-in-capital		Accumulated other comprehensive income (loss)		Retained earnings		Treasury stock		Deferred compensation		Total shareholders' equity
Balance, December 31, 2022	$	1,992	$	178	$	16,481	$	(7,414)	$	2,583,261	$	(1,168,949)	$	22,859	$	1,448,408

Net income									86,241						86,241
Other comprehensive income							7,752								7,752
Dividends declared:
Class A $1.19 per share									(54,965)						(54,965)
Class B $178.50 per share									(454)						(454)
Net purchase of treasury stock (2)					(15)						0				(15)
Deferred compensation											(822)		822		0
Rabbi trust distribution (1)											416		(416)		0
Balance, March 31, 2023	$	1,992	$	178	$	16,466	$	338	$	2,614,083	$	(1,169,355)	$	23,265	$	1,486,967

(1)Distributions of our Class A shares were made from the rabbi trust to ~~five~~three incentive compensation deferral plan participants in 2024 and two in 2023.

~~Table of Contents~~

~~ERIE INDEMNITY COMPANY~~

~~STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)~~

~~Three and nine months ended September 30, 2022~~

~~(dollars in thousands, except per share data)~~

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, 2021 $ 1,992 $ 178 $ 16,496 $ (25,288) $ 2,495,190 $ (1,167,828) $ 21,738 $ 1,342,478
Net income 68,619 68,619
Other comprehensive loss (25,189) (25,189)
Dividends declared:
Class A $1.11 per share (51,270) (51,270)
Class B $166.50 per share (423) (423)
Net purchase of treasury stock (1)
(15) 0 (15)
Deferred compensation (802) 802 0
Rabbi trust distribution (2)
298 (298) 0
Balance, March 31, 2022 $ 1,992 $ 178 $ 16,481 $ (50,477) $ 2,512,116 $ (1,168,332) $ 22,242 $ 1,334,200
Net income 80,147 80,147
Other comprehensive loss (23,248) (23,248)
Dividends declared:
Class A $1.11 per share (51,270) (51,270)
Class B $166.50 per share (423) (423)
Net purchase of treasury stock (1)
0 0 0
Deferred compensation (907) 907 0
Rabbi trust distribution (2)
99 (99) 0
Balance, June 30, 2022 $ 1,992 $ 178 $ 16,481 $ (73,725) $ 2,540,570 $ (1,169,140) $ 23,050 $ 1,339,406
Net income 84,313 84,313
Other comprehensive loss (15,447) (15,447)
Dividends declared:
Class A $1.11 per share (51,270) (51,270)
Class B $166.50 per share (423) (423)
Net purchase of treasury stock (1)
0 0 0
Deferred compensation (799) 799 0
Rabbi trust distribution (2)
1,457 (1,457) 0
Balance, September 30, 2022 $ 1,992 $ 178 $ 16,481 $ (89,172) $ 2,573,190 $ (1,168,482) $ 22,392 $ 1,356,579

~~(1)~~(2)Net ~~purchases~~purchase of treasury stock in ~~2022 include~~2023 includes the repurchase of our Class A common stock in the open market that were subsequently distributed to satisfy stock-based compensation awards.

~~(2)Distributions of our Class A shares were made from the rabbi trust to four incentive compensation deferral plan participants in 2022.~~

See accompanying notes to Financial Statements.

Table of Contents

ERIE INDEMNITY COMPANY

STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


			Nine months ended
			September 30,
			2023		2022
		Three months ended						Three months ended
		March 31,						March 31,
		2024					2024		2023
Cash flows from operating activities	Cash flows from operating activities
Management fee received
Management fee received
Management fee received	Management fee received		$	1,799,681	$	1,574,694
Administrative services reimbursements received	Administrative services reimbursements received		538,943		487,081
Service agreement revenue received	Service agreement revenue received		19,367		19,025
Net investment income received	Net investment income received		42,579		28,901

Commissions paid to agents	Commissions paid to agents		(889,510)		(771,664)
Agents bonuses paid			(112,968)		(131,699)
Commissions paid to agents
Commissions paid to agents
Incentive compensation paid to agents
Salaries and wages paid	Salaries and wages paid		(178,176)		(164,726)
Pension contribution and employee benefits paid	Pension contribution and employee benefits paid		(150,992)		(57,222)
General operating expenses paid	General operating expenses paid		(226,949)		(187,152)
Administrative services expenses paid	Administrative services expenses paid		(540,834)		(497,007)
Income taxes paid			(68,372)		(59,989)
Interest paid			—		(2,134)
Income taxes recovered (paid)

Net cash provided by operating activities
Net cash provided by operating activities
Net cash provided by operating activities	Net cash provided by operating activities		232,769		238,108

Cash flows from investing activities	Cash flows from investing activities
Cash flows from investing activities
Cash flows from investing activities
Purchase of investments:	Purchase of investments:
Purchase of investments:
Purchase of investments:
Available-for-sale securities
Available-for-sale securities
Available-for-sale securities	Available-for-sale securities		(206,616)		(375,466)
Equity securities	Equity securities		(26,195)		(12,956)

Other investments	Other investments		(7)		(157)
Other investments
Other investments
Proceeds from investments:	Proceeds from investments:
Available-for-sale securities sales
Available-for-sale securities sales
Available-for-sale securities sales	Available-for-sale securities sales		126,361		238,732
Available-for-sale securities maturities/calls	Available-for-sale securities maturities/calls		55,772		111,419
Equity securities	Equity securities		14,919		16,679

Other investments	Other investments		853		429
Other investments
Other investments
Purchase of fixed assets	Purchase of fixed assets		(72,101)		(50,885)
Proceeds from disposal of fixed assets			—		265

Loans to agents
Loans to agents
Loans to agents	Loans to agents		(5,473)		(9,570)
Collections on agent loans	Collections on agent loans		6,757		6,513
Net cash used in investing activities	Net cash used in investing activities		(105,730)		(74,997)

Cash flows from financing activities	Cash flows from financing activities
Cash flows from financing activities
Cash flows from financing activities

Dividends paid to shareholders	Dividends paid to shareholders		(166,256)		(155,079)
Proceeds from short-term borrowings			—		55,000
Payments on short-term borrowings			—		(55,000)
Payments on long-term borrowings			—		(94,070)

Dividends paid to shareholders

Dividends paid to shareholders

Net cash used in financing activities	Net cash used in financing activities		(166,256)		(249,149)

Net decrease in cash and cash equivalents			(39,217)		(86,038)
Cash and cash equivalents, beginning of period			142,090		183,702
Cash and cash equivalents, end of period			$	102,873	$	97,664

Net cash used in financing activities

Net cash used in financing activities

Net increase (decrease) in cash, cash equivalents, and restricted cash
Net increase (decrease) in cash, cash equivalents, and restricted cash
Net increase (decrease) 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	Supplemental disclosure of noncash transactions
Supplemental disclosure of noncash transactions
Supplemental disclosure of noncash transactions
Liability incurred to purchase fixed assets
Liability incurred to purchase fixed assets
Liability incurred to purchase fixed assets	Liability incurred to purchase fixed assets		$	—	$	26,386
Operating lease assets obtained in exchange for lease liabilities	Operating lease assets obtained in exchange for lease liabilities		$	7,674	$	3,176

See accompanying notes to Financial Statements.

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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Nature of Operations

Erie Indemnity Company ("Indemnity", "we", "us", "our") is a publicly held Pennsylvania business corporation that has since its incorporation in 1925 served as the attorney-in-fact for the subscribers (policyholders) at the Erie Insurance Exchange ("Exchange"). The Exchange, which also commenced business in 1925, is a Pennsylvania-domiciled 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 with respect to all claims handling and investment management services, as well as the service provider for all claims handling, life insurance, and investment management services for ~~its~~the Exchange's insurance subsidiaries, collectively referred to as "administrative services". Acting as attorney-in-fact in these two capacities is done in accordance with a subscriber's agreement (a limited power of attorney) executed individually by each subscriber (policyholder), which appoints usIndemnity as ~~their common~~each subscriber's attorney-in-fact to transact certain business on their behalf. ~~Pursuant to~~In accordance with the subscriber's agreement for acting as attorney-in-fact in these two capacities, we ~~earn~~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 toon 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 ~~additional commissions and bonuses to agents,~~incentive compensation, which ~~are~~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.

~~The Exchange, by virtue of~~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 anthe 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 ~~accordance with~~ 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 ~~would~~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 ~~its~~net management fee and ~~cost~~other reimbursements. See Note 12, "Concentrations of Credit Risk".

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Note 2. Significant Accounting Policies

Basis of presentation

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2023.~~2024. For further information, refer to the financial statements and footnotes included in our Form 10-K for the year ended December 31, ~~2022~~2023 as filed with the Securities and Exchange Commission ("SEC") on ~~March 1, 2023.~~February 26, 2024.

Use of estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Recently issued accounting standards and disclosure rules

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures", which requires entities to disclose significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported period of profit or loss, and requires entities with a single reporting segment to provide all disclosures required by Topic 280. The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The update is required to be applied retrospectively to prior periods presented in the financial statements, based on the significant segment expense categories identified and disclosed in the period of adoption. This will have no impact on our financial statements. We are currently evaluating the impact of adoption on our disclosures.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures", which requires entities to disclose specific categories in an effective tax rate reconciliation, additional information for reconciling items that meet a quantitative threshold, and certain information about income taxes paid. The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments can be applied on either a prospective or retrospective basis. This will have no impact on our financial statements. We are currently evaluating the impact of adoption on our disclosures.

In March 2024, the SEC adopted final rules under SEC Release No. 33-11275, "The Enhancement and Standardization of Climate-Related Disclosures for Investors", requiring registrants to disclose certain climate-related information in registration statements and annual reports. The final rules include disclosure of climate-related risks that are reasonably likely to have a material impact on a registrant’s business, results of operations, or financial condition. Disclosures related to significant effects of severe weather events and other natural conditions and amounts related to carbon offsets and renewable energy credits or certificates, are required in the financial statements in certain circumstances. Disclosure requirements will phase in for fiscal years beginning in 2025 and be applied prospectively upon adoption. On April 4, 2024, the SEC determined to voluntarily stay the final rules pending ongoing litigation. We are currently evaluating the impact of adoption on our disclosures.

Other assets

Other assets primarily include limited partnership investments, other loans receivable, held-to-maturity securities, operating lease assets, and other long-term prepaid assets. Limited partnership investments are recorded using the equity method of accounting. Other loans receivable include loans issued to fund real estate development projects supporting revitalization efforts in our community. The loans are carried at unpaid principal balance, including any paid-in-kind interest capitalized as additional principal, if applicable, net of a current expected credit loss allowance. Any current portion of other loans receivable is recorded in prepaid expenses and other current assets. Held-to-maturity securities are carried at amortized cost, net of a current expected credit loss allowance. The allowances are calculated using the estimated value of, and priority rights to, collateral in the event of default or external loss rates based on comparable losses, and considers current market conditions and forecasted information. Changes to the allowances are recognized in earnings as adjustments to net impairment recoveries (losses) or other income (expense) depending on the nature of the asset. Interest on other loans receivable and held-to-maturity securities is recorded primarily in investment income as earned.

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Note 3. Revenue

The majority of our revenue is derived from the subscriber’s agreement between us and the subscribers (policyholders) at the Exchange. ~~Pursuant to~~In accordance with the subscriber’s agreement, we ~~earn~~retain a management fee calculated as a percentage, not to exceed 25%, of all direct and affiliated assumed written premiums of the Exchange. We allocate a portion of our management fee revenue, currently 25% of the direct and affiliated assumed written premiums of the Exchange, between the two 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 ~~its~~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.

~~The Exchange, by virtue of~~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 anthe 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 ~~accordance with~~ 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. Collectively, these services represent a second performance obligation under the subscriber’s agreement and the service agreements. The revenue allocated to this performance obligation is recognized over a four-year period representing the time over which these services are provided. The portion of revenue not yet earned is recorded as a contract liability in the Statements of Financial Position. During the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, we recognized revenue of ~~$7.7~~$15.0 million ~~and $31.5 million, respectively,~~ that was included in the contract liability balance as of December 31, ~~2022.~~2023. During the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, we recognized revenue of ~~$7.4~~$13.3 million ~~and $30.1 million, respectively,~~ that was included in the contract liability balance as of December 31, ~~2021.~~2022. The administrative services expenses we incur and the related reimbursements we receive are recorded gross in the Statements of Operations.

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

The following table disaggregates revenue by our two performance ~~obligations:~~obligations for the three months ended March 31:


		Three months ended September 30,				Nine months ended September 30,
(in thousands)	(in thousands)	2023		2022			2023		2022

(in thousands)

(in thousands)
Management fee revenue - policy issuance and renewal services
Management fee revenue - policy issuance and renewal services
Management fee revenue - policy issuance and renewal services	Management fee revenue - policy issuance and renewal services	$	649,049	$	551,666		$	1,840,478	$	1,584,213

Management fee revenue - administrative services	Management fee revenue - administrative services	16,151		14,657			46,976		43,446

Management fee revenue - administrative services

Management fee revenue - administrative services
Administrative services reimbursement revenue	Administrative services reimbursement revenue	187,118		168,653			544,411		492,655
Administrative services reimbursement revenue
Administrative services reimbursement revenue
Total revenue from administrative services
Total revenue from administrative services
Total revenue from administrative services	Total revenue from administrative services	$	203,269	$	183,310		$	591,387	$	536,101

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Note 4. Earnings Per Share

Class A and Class B basic earnings per share and Class B diluted earnings per share are calculated under the two-class method. The two-class method allocates earnings to each class of stock based upon its dividend rights. Class B shares are convertible into Class A shares at a conversion ratio of 2,400 to 1. See Note 10, "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.

A reconciliation of the numerators and denominators used in the basic and diluted per-share computations is presented as follows for each class of common ~~stock:~~stock for the three months ended March 31:


		Three months ended September 30,
		2023					2022
		2024
		2024
		2024													2023
(dollars in thousands, except per share data)	(dollars in thousands, except per share data)	Allocated net income (numerator)		Weighted shares (denominator)	Per-share amount		Allocated net income (numerator)		Weighted shares (denominator)	Per-share amount		(dollars in thousands, except per share data)	Allocated net income (numerator)	Weighted shares (denominator)	Per-share amount	Allocated net income (numerator)	Weighted shares (denominator)	Per-share amount
Class A – Basic EPS:	Class A – Basic EPS:
Income available to Class A stockholders
Income available to Class A stockholders
Income available to Class A stockholders	Income available to Class A stockholders	$	129,967	46,189,037	$	2.81	$	83,623	46,189,025	$	1.81
Dilutive effect of stock-based awards	Dilutive effect of stock-based awards	0		9,532	—		0		6,586	—
Assumed conversion of Class B shares	Assumed conversion of Class B shares	1,073		6,100,800	—		690		6,100,800	—
Class A – Diluted EPS:	Class A – Diluted EPS:
Income available to Class A stockholders on Class A equivalent shares	Income available to Class A stockholders on Class A equivalent shares	$	131,040	52,299,369	$	2.51	$	84,313	52,296,411	$	1.61
Income available to Class A stockholders on Class A equivalent shares
Income available to Class A stockholders on Class A equivalent shares
Class B – Basic and diluted EPS:	Class B – Basic and diluted EPS:
Income available to Class B stockholders
Income available to Class B stockholders
Income available to Class B stockholders	Income available to Class B stockholders	$	1,073	2,542	$	422	$	690	2,542	$	272

		Nine months ended September 30,
		2023					2022
(dollars in thousands, except per share data)		Allocated net income (numerator)		Weighted shares (denominator)	Per-share amount		Allocated net income (numerator)		Weighted shares (denominator)	Per-share amount
Class A – Basic EPS:
Income available to Class A stockholders		$	332,389	46,188,962	$	7.20	$	231,171	46,188,878	$	5.00
Dilutive effect of stock-based awards		0		8,893	—		0		8,007	—
Assumed conversion of Class B shares		2,744		6,100,800	—		1,908		6,100,800	—
Class A – Diluted EPS:
Income available to Class A stockholders on Class A equivalent shares		$	335,133	52,298,655	$	6.41	$	233,079	52,297,685	$	4.46
Class B – Basic and diluted EPS:
Income available to Class B stockholders		$	2,744	2,542	$	1,079	$	1,908	2,542	$	751

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Note 5. Fair Value

Financial instruments carried at fair value

Our available-for-sale and equity securities are recorded at fair value, which is the price that would be received to sell the asset in an orderly transaction between willing market participants as of the measurement date.

Valuation techniques used to derive the fair value of our available-for-sale and equity securities are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources. Unobservable inputs reflect our own assumptions regarding fair market value for these securities. Financial instruments are categorized based upon the following characteristics or inputs to the valuation techniques:

•Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.

•Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

•Level 3 – Unobservable inputs for the asset or liability.

Estimates of fair values for our investment portfolio are obtained primarily from a nationally recognized pricing service. Our Level 1 securities are valued using an exchange traded price provided by the pricing service. Pricing service valuations for Level 2 securities include multiple verifiable, observable inputs including benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data. Pricing service valuations for Level 3 securities are based upon proprietary models and are used when observable inputs are not available or in illiquid markets.

Although virtually all of our prices are obtained from third party sources, we also perform internal pricing reviews, including evaluating the methodology and inputs used to ensure that we determine the proper classification level of the financial instrument and reviewing securities with price changes that vary significantly from current market conditions or independent price sources. Price variances are investigated and corroborated by market data and transaction volumes. We have reviewed the pricing methodologies of our pricing service as well as other observable inputs and believe that the prices adequately consider market activity in determining fair value.

In limited circumstances we adjust the price received from the pricing service when, in our judgment, a better reflection of fair value is available based upon corroborating information and our knowledge and monitoring of market conditions such as a disparity in price of comparable securities and/or non-binding broker quotes. In other circumstances, certain securities are internally priced because prices are not provided by the pricing service.

When a price from the pricing service is not available, values are determined by obtaining broker/dealer quotes and/or market comparables. When available, we obtain multiple quotes for the same security. The ultimate value for these securities is determined based upon our best estimate of fair value using corroborating market information. As of ~~September 30, 2023,~~March 31, 2024, nearly all of our available-for-sale and equity securities were priced using a third party pricing service.

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The following tables present our fair value measurements on a recurring basis by asset class and level of input as of:


		March 31, 2024													March 31, 2024
(in thousands)											(in thousands)	Total	Level 1	Level 2		Level 3
Available-for-sale securities:

			September 30, 2023
(in thousands)			Total		Level 1		Level 2		Level 3
Available-for-sale securities:

Corporate debt securities

Corporate debt securities

Corporate debt securities	Corporate debt securities		$	566,967	$	0	$	562,862	$	4,105
Collateralized debt obligations	Collateralized debt obligations		110,488		0		110,488		0
Commercial mortgage-backed securities	Commercial mortgage-backed securities		72,032		0		64,625		7,407
Residential mortgage-backed securities	Residential mortgage-backed securities		150,394		0		150,389		5
Other debt securities	Other debt securities		15,356		0		15,356		0

U.S. Treasury
Total available-for-sale securities	Total available-for-sale securities		915,237		0		903,720		11,517
Equity securities:	Equity securities:
Financial services sector
Financial services sector
Financial services sector	Financial services sector		65,071		796		60,819		3,456
Utilities sector	Utilities sector		7,291		0		7,291		0
Energy sector	Energy sector		4,131		0		4,131		0
Consumer sector	Consumer sector		2,288		0		2,288		0
Technology sector	Technology sector		500		0		0		500
Industrial sector	Industrial sector		177		0		177		0
Communications sector	Communications sector		58		58		0		0
Total equity securities	Total equity securities		79,516		854		74,706		3,956
Total	Total		$	994,753	$	854	$	978,426	$	15,473


		December 31, 2023													December 31, 2023
(in thousands)											(in thousands)	Total	Level 1	Level 2		Level 3
Available-for-sale securities:

			December 31, 2022
(in thousands)			Total		Level 1		Level 2		Level 3
Available-for-sale securities:

Corporate debt securities

Corporate debt securities

Corporate debt securities	Corporate debt securities		$	553,382	$	0	$	549,696	$	3,686
Collateralized debt obligations	Collateralized debt obligations		102,537		0		102,537		0
Commercial mortgage-backed securities	Commercial mortgage-backed securities		66,054		0		55,144		10,910
Residential mortgage-backed securities	Residential mortgage-backed securities		150,415		0		146,231		4,184
Other debt securities	Other debt securities		22,273		0		22,273		0

Total available-for-sale securities	Total available-for-sale securities		894,661		0		875,881		18,780
Total available-for-sale securities
Total available-for-sale securities
Equity securities:	Equity securities:
Financial services sector
Financial services sector
Financial services sector	Financial services sector		61,084		0		57,305		3,779
Utilities sector	Utilities sector		5,708		0		5,708		0
Energy sector	Energy sector		3,576		0		3,576		0
Consumer sector	Consumer sector		1,854		0		1,854		0
Technology sector
Industrial sector
Communications sector	Communications sector		338		0		338		0

Total equity securities	Total equity securities		72,560		0		68,781		3,779
Total	Total		$	967,221	$	0	$	944,662	$	22,559

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We review the fair value hierarchy classifications each reporting period. Transfers between hierarchy levels may occur due to changes in available market observable inputs.

Level 3 Assets – ~~2023 Quarterly~~2024 Year-to-Date Change:


(in thousands)	(in thousands)	Beginning balance at June 30, 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 September 30, 2023		(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:	Available-for-sale securities:
Corporate debt securities	Corporate debt securities	$	5,123	$	10	$	123	$	1,661	$	(511)	$	730	$	(3,031)	$	4,105
Corporate debt securities
Corporate debt securities

Commercial mortgage-backed securities
Commercial mortgage-backed securities
Commercial mortgage-backed securities	Commercial mortgage-backed securities	6,533		(182)		(56)		0		(366)		1,478		0		7,407
Residential mortgage- backed securities	Residential mortgage- backed securities	12		0		0		0		(7)		0		0		5

Total available-for-sale securities	Total available-for-sale securities	11,668		(172)		67		1,661		(884)		2,208		(3,031)		11,517
Total available-for-sale securities
Total available-for-sale securities
Equity securities	Equity securities	4,730		33		—		1,000		0		0		(1,807)		3,956
Total Level 3 securities	Total Level 3 securities	$	16,398	$	(139)	$	67	$	2,661	$	(884)	$	2,208	$	(4,838)	$	15,473

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 September 30, 2023
Available-for-sale securities:
Corporate debt securities $ 3,686 $ (4) $ 245 $ 3,193 $ (1,256) $ 3,883 $ (5,642) $ 4,105
Commercial mortgage-backed securities 10,910 (542) 44 1,455 (551) 1,944 (5,853) 7,407
Residential mortgage- backed securities 4,184 (5) 96 0 (115) 33 (4,188) 5
Total available-for-sale securities 18,780 (551) 385 4,648 (1,922) 5,860 (15,683) 11,517
Equity securities 3,779 26 — 1,958 0 0 (1,807) 3,956
Total Level 3 securities $ 22,559 $ (525) $ 385 $ 6,606 $ (1,922) $ 5,860 $ (17,490) $ 15,473

~~Level 3 Assets – 2022 Quarterly Change:~~

(in thousands) Beginning balance at June 30, 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 September 30, 2022
Available-for-sale securities:
Corporate debt securities $ 6,109 $ (7) $ (28) $ 753 $ (495) $ 2,899 $ (1,956) $ 7,275
Commercial mortgage-backed securities 8,871 (188) (413) 0 (660) 1,174 (3,417) 5,367
Residential mortgage- backed securities 42,549 (667) (1,708) 0 (6,626) 674 (30,560) 3,662
Total available-for-sale securities 57,529 (862) (2,149) 753 (7,781) 4,747 (35,933) 16,304
Equity securities 1,866 (18) — 0 0 0 0 1,848
Total Level 3 securities $ 59,395 $ (880) $ (2,149) $ 753 $ (7,781) $ 4,747 $ (35,933) $ 18,152

~~Table of Contents~~

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


(in thousands)	(in thousands)	Beginning balance at December 31, 2021		Included in earnings(1)		Included in other comprehensive income (loss)		Purchases		Sales		Transfers into Level 3(2)		Transfers out of Level 3(2)		Ending balance at September 30, 2022		(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 March 31, 2023
Available-for-sale securities:	Available-for-sale securities:
Corporate debt securities	Corporate debt securities	$	5,256	$	(2)	$	(417)	$	5,687	$	(3,614)	$	8,673	$	(8,308)	$	7,275
Corporate debt securities
Corporate debt securities

Commercial mortgage-backed securities
Commercial mortgage-backed securities
Commercial mortgage-backed securities	Commercial mortgage-backed securities	15,728		(892)		(1,071)		0		(3,825)		5,509		(10,082)		5,367
Residential mortgage-backed securities	Residential mortgage-backed securities	8,814		(643)		(2,042)		4,887		(9,472)		38,214		(36,096)		3,662

Total available-for-sale securities	Total available-for-sale securities	29,798		(1,537)		(3,530)		10,574		(16,911)		52,396		(54,486)		16,304
Total available-for-sale securities
Total available-for-sale securities
Equity securities	Equity securities	2,083		(235)		—		0		0		0		0		1,848
Total Level 3 securities	Total Level 3 securities	$	31,881	$	(1,772)	$	(3,530)	$	10,574	$	(16,911)	$	52,396	$	(54,486)	$	18,152

(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

The following table presents the carrying values and fair values of financial instruments categorized as Level 3 in the fair value hierarchy that are recorded at carrying value as of:

March 31, 2024

December 31, 2023

(in thousands)

Carrying value

Fair value

Carrying value

Fair value

Agent loans, net

Other loans receivable, net (1)

September 30, 2023

December 31, 2022

(in thousands)

Carrying value

Fair value

Carrying value

Fair value

Agent loans

68,192

58,955

69,476

62,954

Held-to-maturity securities, net (2)

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

(2) Held-to-maturity securities are included in the line item "Other assets, net" in the Statement of Financial Position.

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Note 6. Investments

~~Available-for-sale~~Fixed maturity securities

See Note 5, "Fair Value" for additional fair value disclosures. The following tables summarize the amortized cost and estimated fair value, net of credit loss allowance, of our ~~available-for-sale~~fixed maturity securities as of:


			September 30, 2023
		March 31, 2024													March 31, 2024
(in thousands)	(in thousands)		Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value		(in thousands)	Amortized cost	Gross unrealized gains	Gross unrealized losses		Estimated fair value

Available-for-sale securities:

Available-for-sale securities:

Available-for-sale securities:
Corporate debt securities
Corporate debt securities
Corporate debt securities	Corporate debt securities		$	596,538	$	776	$	30,347	$	566,967
Collateralized debt obligations	Collateralized debt obligations		113,252		64		2,828		110,488
Commercial mortgage-backed securities	Commercial mortgage-backed securities		78,491		90		6,549		72,032
Residential mortgage-backed securities	Residential mortgage-backed securities		173,529		11		23,146		150,394
Other debt securities	Other debt securities		16,298		0		942		15,356
U.S. Treasury
Total available-for-sale securities, net

Total available-for-sale securities, net			$	978,108	$	941	$	63,812	$	915,237
Held-to-maturity securities - states & political subdivisions
Held-to-maturity securities - states & political subdivisions
Held-to-maturity securities - states & political subdivisions

Total fixed maturity securities, net
Total fixed maturity securities, net
Total fixed maturity securities, net


		December 31, 2023													December 31, 2023
(in thousands)											(in thousands)	Amortized cost	Gross unrealized gains	Gross unrealized losses		Estimated fair value
Available-for-sale securities:

			December 31, 2022
(in thousands)			Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value

Corporate debt securities

Corporate debt securities

Corporate debt securities	Corporate debt securities		$	588,536	$	657	$	35,811	$	553,382
Collateralized debt obligations	Collateralized debt obligations		107,730		11		5,204		102,537
Commercial mortgage-backed securities	Commercial mortgage-backed securities		73,855		157		7,958		66,054
Residential mortgage-backed securities	Residential mortgage-backed securities		166,412		72		16,069		150,415
Other debt securities	Other debt securities		24,602		0		2,329		22,273

Total available-for-sale securities, net	Total available-for-sale securities, net		$	961,135	$	897	$	67,371	$	894,661
Total available-for-sale securities, net
Total available-for-sale securities, net

The amortized cost and estimated fair value of available-for-sale and held-to-maturity securities at ~~September 30, 2023~~March 31, 2024 are shown below by remaining contractual term to maturity. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

September 30, 2023
Amortized Estimated
(in thousands) cost fair value
Due in one year or less $ 63,056 $ 61,957
Due after one year through five years 431,382 409,557
Due after five years through ten years 171,654 164,848
Due after ten years 312,016 278,875
Total available-for-sale securities, net (1)
$ 978,108 $ 915,237


	March 31, 2024
	Amortized		Estimated
(in thousands)	cost		fair value
Available-for-sale securities:
Due in one year or less	$	72,252	$	71,072
Due after one year through five years	418,035		408,886
Due after five years through ten years	194,162		192,549
Due after ten years	317,457		297,138
Total available-for-sale securities, net (1)	1,001,906		969,645

Held-to-maturity securities - due after ten years	4,833		4,833

Total fixed maturity securities, net	$	1,006,739	$	974,478

(1)The contractual maturities of our available-for-sale securities are included in the table. However, given our intent to sell certain impaired securities, these securities are classified as current assets in our Statement of Financial Position at ~~September 30, 2023.~~March 31, 2024.

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The below securities have been evaluated for credit impairment using criteria described within Note 2, "Significant Accounting Policies, of Notes to Financial Statements" included in our Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on February 26, 2024. The gross unrealized losses are primarily attributable to changes in interest rates and ~~determined~~are not deemed to be ~~temporary declines in fair value for which~~credit-related. We do not have the intent to sell these securities and it is more likely than not that we ~~expect~~would not be required to ~~recover our entire principal plus interest.~~ sell these securities before the anticipated recovery of the amortized cost basis.

The following tables present available-for-sale securities based on length of time in a gross unrealized loss position as of:


		March 31, 2024																						March 31, 2024
		Less than 12 months																	Less than 12 months			12 months or longer		Total
(dollars in thousands)																(dollars in thousands)	Fair value	Unrealized losses		Fair value	Unrealized losses		Fair value		Unrealized losses	No. of holdings

			September 30, 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

Corporate debt securities

Corporate debt securities	Corporate debt securities		$	173,565	$	4,529	$	345,584	$	25,818	$	519,149	$	30,347	832
Collateralized debt obligations	Collateralized debt obligations		7,010		39		93,940		2,789		100,950		2,828		154
Commercial mortgage-backed securities	Commercial mortgage-backed securities		33,208		1,064		30,692		5,485		63,900		6,549		156
Residential mortgage-backed securities	Residential mortgage-backed securities		48,919		3,118		97,676		20,028		146,595		23,146		182
Other debt securities	Other debt securities		7,605		121		7,752		821		15,357		942		39

U.S. Treasury
Total available-for-sale securities	Total available-for-sale securities		$	270,307	$	8,871	$	575,644	$	54,941	$	845,951	$	63,812	1,363
Quality breakdown of available-for-sale securities:	Quality breakdown of available-for-sale securities:
Investment grade	Investment grade		$	241,402	$	8,142	$	523,719	$	48,245	$	765,121	$	56,387	814
Investment grade
Investment grade
Non-investment grade	Non-investment grade		28,905		729		51,925		6,696		80,830		7,425		549
Total available-for-sale securities	Total available-for-sale securities		$	270,307	$	8,871	$	575,644	$	54,941	$	845,951	$	63,812	1,363


		December 31, 2023																						December 31, 2023
		Less than 12 months																	Less than 12 months			12 months or longer		Total
(dollars in thousands)																(dollars in thousands)	Fair value	Unrealized losses		Fair value	Unrealized losses		Fair value		Unrealized losses	No. of holdings

			December 31, 2022
			Less than 12 months				12 months or longer				Total
(dollars in thousands)			Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses		No. of holdings

Corporate debt securities

Corporate debt securities

Corporate debt securities	Corporate debt securities		$	397,511	$	21,371	$	121,094	$	14,440	$	518,605	$	35,811	916
Collateralized debt obligations	Collateralized debt obligations		44,823		2,529		55,335		2,675		100,158		5,204		159
Commercial mortgage-backed securities	Commercial mortgage-backed securities		41,139		5,124		15,864		2,834		57,003		7,958		131
Residential mortgage-backed securities	Residential mortgage-backed securities		109,499		9,131		31,465		6,938		140,964		16,069		161
Other debt securities	Other debt securities		15,682		1,323		6,591		1,006		22,273		2,329		46

Total available-for-sale securities	Total available-for-sale securities		$	608,654	$	39,478	$	230,349	$	27,893	$	839,003	$	67,371	1,413
Total available-for-sale securities
Total available-for-sale securities
Quality breakdown of available-for-sale securities:	Quality breakdown of available-for-sale securities:
Investment grade
Investment grade
Investment grade	Investment grade		$	525,805	$	31,904	$	215,742	$	25,205	$	741,547	$	57,109	761
Non-investment grade	Non-investment grade		82,849		7,574		14,607		2,688		97,456		10,262		652
Total available-for-sale securities	Total available-for-sale securities		$	608,654	$	39,478	$	230,349	$	27,893	$	839,003	$	67,371	1,413

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Credit loss ~~allowance on investments~~allowances

The ~~current expected~~following tables present a roll-forward of the allowances for credit ~~loss allowance~~losses on ~~agent loans was $1.0 million at both September 30, 2023~~fixed maturity securities and ~~December 31, 2022. The current expected credit loss allowance on available-for-sale securities was $0.4 million at September 30, 2023 and $0.2 million at December 31, 2022.~~financing receivables for the three months ended March 31:


	2024
(in thousands)	Available-for-sale securities		Held-to-maturity securities		Other loans receivable		Agent loans
Balance, beginning of period	$	597	$	0	$	11,081	$	957
Provision and recoveries	164		2,167		172		0
Sales/collections and write-offs	(186)		0		0		0
Balance, end of period	$	575	$	2,167	$	11,253	$	957


	2023
(in thousands)	Available-for-sale securities		Held-to-maturity securities		Other loans receivable		Agent loans
Balance, beginning of period	$	249	$	—	$	3,775	$	957
Provision and recoveries	201		—		32		0
Sales/collections and write-offs	(102)		—		(98)		0
Balance, end of period	$	348	$	—	$	3,709	$	957

Net investment income

Investment income (loss), net of expenses, was generated from the following ~~portfolios:~~portfolios for the three months ended March 31:


		Three months ended September 30,				Nine months ended September 30,
(in thousands)	(in thousands)	2023		2022		2023		2022

(in thousands)

(in thousands)
Available-for-sale securities
Available-for-sale securities
Available-for-sale securities	Available-for-sale securities	$	11,037	$	8,546	$	31,404	$	21,919
Equity securities	Equity securities	1,161		979		3,260		2,942
Equity securities
Equity securities
Limited partnerships (1)
Limited partnerships (1)
Limited partnerships (1)	Limited partnerships (1)	(13)		(4,643)		(10,725)		(2,158)
Cash equivalents and other	Cash equivalents and other	2,687		1,251		6,714		2,901
Cash equivalents and other
Cash equivalents and other
Total investment income
Total investment income
Total investment income	Total investment income	14,872		6,133		30,653		25,604
Less: investment expenses	Less: investment expenses	230		299		293		998
Less: investment expenses
Less: investment expenses
Net investment income	Net investment income	$	14,642	$	5,834	$	30,360	$	24,606
Net investment income
Net investment income

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

~~Table of Contents~~

Net realized and unrealized investment ~~losses~~gains (losses)

Realized and unrealized gains (losses) on investments were as ~~follows:~~follows for the three months ended March 31:


		Three months ended September 30,				Nine months ended September 30,
(in thousands)	(in thousands)	2023		2022		2023		2022

(in thousands)

(in thousands)
Available-for-sale securities:
Available-for-sale securities:
Available-for-sale securities:	Available-for-sale securities:
Gross realized gains	Gross realized gains	$	213	$	146	$	519	$	1,055
Gross realized gains
Gross realized gains
Gross realized losses
Gross realized losses
Gross realized losses	Gross realized losses	(2,693)		(4,752)		(6,714)		(10,163)
Net realized losses on available-for-sale securities	Net realized losses on available-for-sale securities	(2,480)		(4,606)		(6,195)		(9,108)
Net realized losses on available-for-sale securities
Net realized losses on available-for-sale securities
Equity securities	Equity securities	244		(1,624)		(3,060)		(14,727)
Miscellaneous		9		0		9		2
Net realized and unrealized investment losses		$	(2,227)	$	(6,230)	$	(9,246)	$	(23,833)
Equity securities
Equity securities

Net realized and unrealized investment gains (losses)

Net realized and unrealized investment gains (losses)

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:~~follows for the three months ended March 31:


		Three months ended September 30,				Nine months ended September 30,
(in thousands)	(in thousands)	2023		2022		2023		2022

(in thousands)

(in thousands)
Equity securities:
Equity securities:
Equity securities:	Equity securities:
Net gains (losses) recognized during the period	Net gains (losses) recognized during the period	$	244	$	(1,624)	$	(3,060)	$	(14,727)
Net gains (losses) recognized during the period
Net gains (losses) recognized during the period
Less: net gains (losses) recognized on securities sold
Less: net gains (losses) recognized on securities sold
Less: net gains (losses) recognized on securities sold	Less: net gains (losses) recognized on securities sold	91		243		(2,636)		(1,327)
Net unrealized gains (losses) recognized on securities held at reporting date	Net unrealized gains (losses) recognized on securities held at reporting date	$	153	$	(1,867)	$	(424)	$	(13,400)
Net unrealized gains (losses) recognized on securities held at reporting date
Net unrealized gains (losses) recognized on securities held at reporting date

Table of Contents

Net impairment losses recognized in earnings

Impairments on ~~available-for-sale securities~~investments were as ~~follows:~~follows for the three months ended March 31:

Three months ended September 30, Nine months ended September 30,
(in thousands) 2023 2022 2023 2022
Available-for-sale securities:
Intent to sell $ (58) $ (45) $ (1,639) $ (146)
Credit (55) (130) (278) (283)
Net impairment losses recognized in earnings $ (113) $ (175) $ (1,917) $ (429)



(in thousands)	2024		2023
Available-for-sale securities:
Intent to sell	$	(174)	$	(1,432)
Credit impaired	(164)		(201)
Total available-for-sale securities	(338)		(1,633)
Held-to-maturity securities - expected credit losses	(2,167)		—

Other loans receivable - expected credit losses	(172)		0
Net impairment losses recognized in earnings	$	(2,677)	$	(1,633)

1918

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Note 7. Bank Line of Credit

We have access to a $100 million bank revolving line of credit with a $25 million letter of credit sublimit that expires on October 29, 2026. As of ~~September 30, 2023,~~March 31, 2024, a total of ~~$99.1~~$99.2 million remains available under the facility due to ~~$0.9~~$0.8 million outstanding letters of credit, which reduce the availability for letters of credit to ~~$24.1~~$24.2 million. We had no borrowings outstanding on our line of credit as of ~~September 30, 2023.~~March 31, 2024. Investments with a fair value of ~~$114.2~~$117.1 million were pledged as collateral on the line of credit at ~~September 30, 2023.~~March 31, 2024. These investments have no trading restrictions and are reported as available-for-sale securities and cash and cash equivalents on our Statement of Financial Position as of ~~September 30, 2023.~~March 31, 2024. The bank requires compliance with certain covenants, which include leverage ratios and debt restrictions. We are in compliance with all covenants at ~~September 30, 2023.~~March 31, 2024.

Note 8. Postretirement Benefits

Pension plans

Our pension plans consist of a noncontributory defined benefit pension plan covering substantially all employees and an unfunded supplemental employee retirement plan ("SERP") for certain members of executive and senior management. The pension plan provides benefits to covered individuals satisfying certain age and service requirements. The defined benefit pension plan and SERP each provide benefits through a final average earnings formula.

Although we are the sponsor of these postretirement plans and record the funded status of these plans, there are reimbursements between us and the Exchange and its subsidiaries ~~reimburse us, or are reimbursed~~ for their allocated share of pension ~~cost~~income or ~~income, respectively.~~cost. These reimbursements represent pension benefits for employees performing administrative services and an allocated share of plan (income) cost for employees in departments that support the administrative functions. ~~As of September 30, 2023,~~For the three months ended March 31, 2024, we reimbursed the Exchange and its subsidiaries for approximately ~~60%~~61% of the annual defined benefit pension income, and ~~36%~~the Exchange and its subsidiaries reimbursed us for approximately 34% of the annual SERP cost. For our funded pension plan, amounts are settled in cash for the portion of pension (income) cost ~~was reimbursed~~allocated to ~~and from, respectively,~~ the Exchange and its subsidiaries. For our unfunded SERP, we pay the obligations when due and amounts are settled in cash between entities when there is a payout.

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 100%. Accordingly, we made a ~~$95~~$33 million contribution ~~during the third quarter of 2023.~~in January 2024. The ~~contribution generated a~~funded pension plan net benefit asset ~~of $65.2 million and~~ is presented separately from ~~our~~the unfunded plan as a non-current asset on our ~~Statement~~Statements of Financial ~~Position as of September 30, 2023.~~Position.

Pension plan ~~(income) cost~~income includes the following ~~components:~~components for the three months ended March 31:


		Three months ended September 30,				Nine months ended September 30,
(in thousands)	(in thousands)	2023		2022		2023		2022

(in thousands)

(in thousands)
Service cost for benefits earned
Service cost for benefits earned
Service cost for benefits earned	Service cost for benefits earned	$	7,190	$	12,560	$	21,572	$	37,681
Interest cost on benefit obligation	Interest cost on benefit obligation	12,548		9,941		37,644		29,823
Interest cost on benefit obligation
Interest cost on benefit obligation
Expected return on plan assets
Expected return on plan assets
Expected return on plan assets	Expected return on plan assets	(17,217)		(13,639)		(51,652)		(40,917)
Prior service cost amortization	Prior service cost amortization	362		361		1,085		1,082
Net actuarial (gain) loss amortization		(3,833)		1,830		(11,498)		5,490
Pension plan (income) cost (1)		$	(950)	$	11,053	$	(2,849)	$	33,159
Prior service cost amortization
Prior service cost amortization
Net actuarial gain amortization
Net actuarial gain amortization
Net actuarial gain amortization
Settlement gain
Settlement gain
Settlement gain
Pension plan income (1)
Pension plan income (1)
Pension plan income (1)

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

2019

Table of Contents

Note 9. Income Taxes

Income tax expense is provided on an interim basis based upon our estimate of the annual effective income tax rate, adjusted each quarter for discrete items. For the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ our effective tax rate was ~~20.0%~~20.8% and ~~20.7%, respectively. For the nine months ended September 30, 2023 and 2022, our effective tax rate was 20.6% and 20.9%~~21.0%, respectively.

Note 10. Capital Stock

Class A and B common stock

Holders of Class B shares may, at their option, convert their shares into Class A shares at the rate of 2,400 Class A shares per Class B share. There were no shares of Class B common stock converted into Class A common stock during the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 and the year ended December 31, ~~2022.~~2023. 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 $150 million, with no time limitation. There were no shares repurchased under this program during the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 and the year ended December 31, ~~2022.~~2023. We had approximately $17.8 million of repurchase authority remaining under this program at ~~September 30, 2023.~~March 31, 2024.

~~Table of Contents~~

Note 11. Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income ("AOCI") (loss) by component, including amounts reclassified to other comprehensive income ("OCI") (loss) and the related line item in the Statements of Operations where net income is presented, are as ~~follows:~~follows for the three months ended March 31:

Three months ended Three months ended
September 30, 2023 September 30, 2022
(in thousands) Before Tax Income Tax Net Before Tax Income Tax Net
Investment securities:
AOCI (loss), beginning of period $ (55,497) $ (11,654) $ (43,843) $ (57,980) $ (12,177) $ (45,803)
OCI (loss) before reclassifications (10,064) (2,114) (7,950) (26,524) (5,570) (20,954)
Realized investment losses 2,480 521 1,959 4,606 968 3,638
Impairment losses 113 24 89 175 37 138
OCI (loss) (7,471) (1,569) (5,902) (21,743) (4,565) (17,178)
AOCI (loss), end of period $ (62,968) $ (13,223) $ (49,745) $ (79,723) $ (16,742) $ (62,981)
Pension and other postretirement plans:
AOCI (loss), beginning of period $ 50,244 $ 10,551 $ 39,693 $ (35,346) $ (7,424) $ (27,922)
Amortization of prior service costs 362 76 286 361 76 285
Amortization of net actuarial (gain) loss (3,833) (805) (3,028) 1,830 384 1,446
OCI (loss) (3,471) (729) (2,742) 2,191 460 1,731
AOCI (loss), end of period $ 46,773 $ 9,822 $ 36,951 $ (33,155) $ (6,964) $ (26,191)
Total
AOCI (loss), beginning of period $ (5,253) $ (1,103) $ (4,150) $ (93,326) $ (19,601) $ (73,725)
Investment securities (7,471) (1,569) (5,902) (21,743) (4,565) (17,178)
Pension and other postretirement plans (3,471) (729) (2,742) 2,191 460 1,731
OCI (loss) (10,942) (2,298) (8,644) (19,552) (4,105) (15,447)
AOCI (loss), end of period $ (16,195) $ (3,401) $ (12,794) $ (112,878) $ (23,706) $ (89,172)
Nine months ended Nine months ended
September 30, 2023 September 30, 2022
(in thousands) Before Tax Income Tax Net Before Tax Income Tax Net
Investment securities:
AOCI (loss), beginning of period $ (66,571) $ (13,980) $ (52,591) $ 7,722 $ 1,621 $ 6,101
OCI (loss) before reclassifications (4,509) (947) (3,562) (96,982) (20,366) (76,616)
Realized investment losses 6,195 1,301 4,894 9,108 1,913 7,195
Impairment losses 1,917 403 1,514 429 90 339
OCI (loss) 3,603 757 2,846 (87,445) (18,363) (69,082)
AOCI (loss), end of period $ (62,968) $ (13,223) $ (49,745) $ (79,723) $ (16,742) $ (62,981)
Pension and other postretirement plans:
AOCI (loss), beginning of period $ 57,186 $ 12,009 $ 45,177 $ (39,734) $ (8,345) $ (31,389)
Amortization of prior service costs 1,085 228 857 1,082 227 855
Amortization of net actuarial (gain) loss (11,498) (2,415) (9,083) 5,497 1,154 4,343
OCI (loss) (10,413) (2,187) (8,226) 6,579 1,381 5,198
AOCI (loss), end of period $ 46,773 $ 9,822 $ 36,951 $ (33,155) $ (6,964) $ (26,191)
Total
AOCI (loss), beginning of period $ (9,385) $ (1,971) $ (7,414) $ (32,012) $ (6,724) $ (25,288)
Investment securities 3,603 757 2,846 (87,445) (18,363) (69,082)
Pension and other postretirement plans (10,413) (2,187) (8,226) 6,579 1,381 5,198
OCI (loss) (6,810) (1,430) (5,380) (80,866) (16,982) (63,884)
AOCI (loss), end of period $ (16,195) $ (3,401) $ (12,794) $ (112,878) $ (23,706) $ (89,172)



	2024						2023
(in thousands)	Before Tax		Income Tax		Net		Before Tax		Income Tax		Net
Investment securities:
AOCI (loss), beginning of period	$	(31,402)	$	(6,595)	$	(24,807)	$	(66,571)	$	(13,980)	$	(52,591)
OCI (loss) before reclassifications	(1,554)		(326)		(1,228)		10,032		2,107		7,925
Realized investment losses	262		55		207		1,619		340		1,279
Impairment losses	338		71		267		1,633		343		1,290

OCI (loss)	(954)		(200)		(754)		13,284		2,790		10,494
AOCI (loss), end of period	$	(32,356)	$	(6,795)	$	(25,561)	$	(53,287)	$	(11,190)	$	(42,097)

Pension and other postretirement plans:
AOCI, beginning of period	$	14,439	$	3,032	$	11,407	$	57,186	$	12,009	$	45,177

Amortization of prior service costs	389		82		307		362		76		286
Amortization of net actuarial gain	(1,751)		(368)		(1,383)		(3,833)		(805)		(3,028)
OCI (loss)	(1,362)		(286)		(1,076)		(3,471)		(729)		(2,742)
AOCI, end of period	$	13,077	$	2,746	$	10,331	$	53,715	$	11,280	$	42,435

Total
AOCI (loss), beginning of period	$	(16,963)	$	(3,563)	$	(13,400)	$	(9,385)	$	(1,971)	$	(7,414)
Investment securities	(954)		(200)		(754)		13,284		2,790		10,494
Pension and other postretirement plans	(1,362)		(286)		(1,076)		(3,471)		(729)		(2,742)
OCI (loss)	(2,316)		(486)		(1,830)		9,813		2,061		7,752
AOCI (loss), end of period	$	(19,279)	$	(4,049)	$	(15,230)	$	428	$	90	$	338

2220

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Note 12. Concentrations of Credit Risk

Financial instruments could potentially expose us to concentrations of credit risk, including our unsecured receivables from the Exchange. The majority of our revenue and receivables are from the Exchange and its affiliates. See also Note 1, "Nature of Operations". Net management fee amounts and other reimbursements due from the Exchange and its affiliates were ~~$620.7~~$641.7 million and ~~$524.9~~$625.3 million at ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively, which includes a current expected credit loss allowance of $0.6 million in both periods.

Note 13. Commitments and Contingencies

We have an agreement with a bank for an agent loan participation program. The maximum amount of loans to be funded through this program is $100 million. We have committed to fund a minimum of 30% of each loan executed through this program. As of ~~September 30, 2023,~~March 31, 2024, outstanding loans executed under this agreement totaled ~~$59.1~~$54.6 million, of which our portion of the loans is ~~$20.6~~$18.5 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 ~~September 30, 2023,~~March 31, 2024, our maximum potential amount of future payments on the guaranteed portion is ~~$6.9~~$7.3 million. All loan payments under the participation program are current as of ~~September 30, 2023.~~March 31, 2024. On April 23, 2024, we increased the maximum amount of loans to be funded through the agent loan participation program to $150 million.

We also have contingent obligations for guarantees related to certain real estate development projects supporting revitalization efforts in our community. As of March 31, 2024, our maximum potential obligation related to guarantees is $7.8 million.

We are involved in litigation arising in the ordinary course of conducting business. In accordance with current accounting standards for loss contingencies and based upon information currently known to us, we establish reserves for litigation when it is probable that a loss associated with a claim or proceeding has been incurred and the amount of the loss or range of loss can be reasonably estimated. When no amount within the range of loss is a better estimate than any other amount, we accrue the minimum amount of the estimable loss. To the extent that such litigation against us may have an exposure to a loss in excess of the amount we have accrued, we believe that such excess would not be material to our financial condition, results of operations, or cash flows. Legal fees are expensed as incurred. We believe that our accruals for legal proceedings are appropriate and, individually and in the aggregate, are not expected to be material to our financial condition, results of operations, or cash flows.

We review all litigation on an ongoing basis when making accrual and disclosure decisions. For certain legal proceedings, we cannot reasonably estimate losses or a range of loss, if any, particularly for proceedings that are in their early stages of development or where the plaintiffs seek indeterminate damages. Various factors, including, but not limited to, the outcome of potentially lengthy discovery and the resolution of important factual questions, may need to be determined before probability can be established or before a loss or range of loss can be reasonably estimated. If the loss contingency in question is not both probable and reasonably estimable, we do not establish an accrual and the matter will continue to be monitored for any developments that would make the loss contingency both probable and reasonably estimable. In the event that a legal proceeding results in a substantial judgment against, or settlement by, us, there can be no assurance that any resulting liability or financial commitment would not have a material adverse effect on our financial condition, results of operations, or cash flows.

Note 14. Subsequent Events

NoOther than increasing the maximum amount of loans to be funded through the agent loan participation program as discussed in Note 13, "Commitments and Contingencies", no items were identified in this period subsequent to the financial statement date that required adjustment or additional disclosure.

2321

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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 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, ~~2022,~~2023, as contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on ~~March 1, 2023.~~February 26, 2024.

INDEX


			Page Number
Cautionary Statement Regarding Forward-Looking Information			2422

Recent Accounting Standards and Disclosure Rules			23
Operating Overview			2523
Results of Operations			2725




Financial Condition			3431



Liquidity and Capital Resources			3532

Critical Accounting Estimates			3734

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

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

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

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

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

◦general business and economic conditions;

◦factors affecting insurance industry ~~competition;~~competition, including technological innovations;

◦dependence upon the independent agency system; and

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

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

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

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

◦changes in government regulation of the insurance industry;

◦litigation and regulatory actions;

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

◦emerging claims and coverage issues in the industry; and

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

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

•ability to attract and retain talented management and employees;

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

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

•ability to maintain uninterrupted business operations;

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

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

•~~our~~ ability to meet liquidity needs and access capital.

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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 AND DISCLOSURE RULES

See Part I, Item 1. "Financial Statements - Note 2, Significant Accounting Policies, of Notes to Financial Statements" contained within this report for a discussion of recently issued accounting standards and disclosure rules, and the impact on our financial statements if known.

OPERATING OVERVIEW

Overview

We serve as the 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 ~~its~~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. ~~Pursuant to~~In accordance with the subscriber’s agreement for acting as attorney-in-fact in these two capacities, we ~~earn~~retain a management fee calculated as a percentage of the direct and affiliated assumed premiums written by the Exchange.

Our earnings are primarily driven by the management fee revenue generated for the services we provide toon behalf of the subscribers at the Exchange. The policy issuance and renewal services we provide ~~to 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 ~~additional commissions and bonuses to agents,~~incentive compensation, which ~~are~~is earned by achieving targeted measures. Agent compensation generally comprises approximately two-thirds of our policy issuance and renewal expenses. 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.

~~By virtue of~~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 anthe 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 ~~accordance with~~ 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 ~~2022,~~2023, approximately 71% of the administrative services expenses were entirely attributable to the respective administrative functions (claims handling, life insurance management and investment management), while the remaining 29% of these expenses were allocations of costs for departments that support these administrative functions. The expenses we incur and related reimbursements we receive for administrative services are presented gross in our Statements of Operations. The subscriber's agreement and service agreements provide for reimbursement of amounts incurred for these services to Indemnity. Reimbursements are settled at cost on a monthly basis. State insurance regulations require that intercompany service agreements and any material amendments be approved in advance by the state insurance department.

Our results of operations are tied to the growth and financial condition of the Exchange as the Exchange is our sole customer, and our earnings are largely generated from management fees based on the direct and affiliated assumed premiums written by the Exchange. The Exchange generates revenue by insuring preferred and standard risks, with personal lines comprising ~~69%~~70% of the ~~2022~~2023 direct and affiliated assumed written premiums and commercial lines comprising the remaining ~~31%~~30%. The principal

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personal lines products are private passenger automobile and homeowners. The principal commercial lines products are commercial multi-peril, commercial automobile and workers compensation.

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Financial Overview


		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
(dollars in thousands, except per share data)
(dollars in thousands, except per share data)
(dollars in thousands, except per share data)
		(Unaudited)
		(Unaudited)
		(Unaudited)

		Three months ended September 30,						Nine months ended September 30,
(dollars in thousands, except per share data)		2023		2022		% Change		2023		2022		% Change
Operating income
		(Unaudited)						(Unaudited)

Operating income

Operating income	Operating income	$	148,471	$	106,472	39.4	%	$	393,172	$	294,784	33.4	%
Total investment income (loss)	Total investment income (loss)	12,302		(571)		NM		19,197		344		NM
Interest expense		—		115		NM		—		2,009		NM
Total investment income (loss)
Total investment income (loss)

Other income

Other income

Other income	Other income	3,001		562		NM		9,643		1,372		NM
Income before income taxes	Income before income taxes	163,774		106,348		54.0		422,012		294,491		43.3
Income before income taxes
Income before income taxes
Income tax expense
Income tax expense
Income tax expense	Income tax expense	32,734		22,035		48.6		86,879		61,412		41.5
Net income	Net income	$	131,040	$	84,313	55.4	%	$	335,133	$	233,079	43.8	%
Net income
Net income
Net income per share – diluted	Net income per share – diluted	$	2.51	$	1.61	55.4	%	$	6.41	$	4.46	43.8	%
Net income per share – diluted
Net income per share – diluted

NM = not meaningful

Operating income increased in ~~both~~ the ~~third~~first quarter ~~and nine months ended September 30, 2023,~~of 2024, compared to the same ~~periods~~period in ~~2022,~~2023, as growth in operating revenue outpaced the growth in operating expenses. Management fee revenue for policy issuance and renewal services increased ~~17.7%~~19.3% to ~~$649.0~~$665.7 million in the ~~third~~first quarter of ~~2023 and 16.2% to $1.8 billion for the nine months ended September 30, 2023.~~2024. 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 both ~~2023~~2024 and ~~2022.~~2023. The direct and affiliated assumed premiums written by the Exchange increased ~~17.6%~~19.0% to $2.7 billion in the ~~third~~first quarter of ~~2023 and increased 16.2% to $7.6 billion for the nine months ended September 30, 2023,~~2024, compared to the same ~~periods~~period in ~~2022.~~2023.

Cost of operations for policy issuance and renewal services increased ~~12.3%~~17.3% to ~~$523.3~~$550.3 million ~~and 12.0% to $1.5 billion~~ in the ~~third~~first quarter ~~and nine months ended September 30, 2023,~~of 2024, compared to the same ~~periods~~period in ~~2022,~~2023, primarily due to higher scheduled commissions driven by direct and affiliated assumed written premium growth, as well as increased agent incentive compensation, employee compensation, and ~~technology investments, partially offset by decreased agent incentive compensation driven by higher claims severity and related loss costs experienced by the Exchange.~~agent-related costs.

Management fee revenue for administrative services increased ~~10.2%~~11.5% to ~~$16.2 million and 8.1% to $47.0~~$16.9 million in the ~~third~~first quarter ~~and nine months ended September 30, 2023,~~of 2024 compared to the same ~~periods~~period in ~~2022.~~2023. The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by ~~$187.1~~$191.6 million in the ~~third~~first quarter of ~~2023 and $544.4 million for the nine months ended September 30, 2023,~~2024, but had no net impact on operating income.

Total investment income increased ~~$12.9 million and $18.9~~$19.8 million in the ~~third~~first quarter ~~and nine months ended September 30, 2023,~~of 2024 compared to the same ~~periods~~period in ~~2022. The results from both periods were~~2023 primarily due to ~~lower net realized and unrealized investment losses and~~ an increase in net investment income as well as net realized and unrealized investment gains in ~~2023~~2024 compared to ~~2022.~~

net losses in 2023.

General Conditions and Trends Affecting Our Business

Economic conditions

Unfavorable changes in economic conditions, including declining consumer confidence, inflation, high unemployment, and the threat of recession, among others, may lead the Exchange’s customers to modify coverage, not renew policies, or even cancel policies, which could adversely affect the premium revenue of the Exchange, and consequently our management fee revenue. ~~Inflation remained elevated from historical levels during the third quarter of 2023. Continued elevated~~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 ~~tort issues~~social inflation may impact adequacy of estimated loss reserves and future premium rates of the Exchange. ~~The extent and duration of the impacts to economic conditions remain uncertain.~~ If any of these items impacted the financial condition or operations of the Exchange, it could have an impact on our financial results. See Financial Condition and Liquidity and Capital Resources contained within this report, as well as Part I. Item 1A. "Risk Factors" included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2022~~2023 as filed with the Securities and Exchange Commission on ~~March 1, 2023~~February 26, 2024 for a discussion of the potential impacts to our operations or those of the Exchange.

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Financial market volatility

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

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RESULTS OF OPERATIONS

Management fee revenue

We have two performance obligations in the subscriber’s agreement, providing policy issuance and renewal services and acting as attorney-in-fact for the subscribers at the Exchange, as well as the service provider for ~~its~~the Exchange's insurance subsidiaries with respect to all administrative services. We ~~earn~~retain a 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%~~, the maximum rate,~~ for both ~~2023~~2024 and ~~2022.~~2023. 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.

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The following table presents the allocation and disaggregation of revenue for our two performance ~~obligations:~~obligations for the three months ended March 31:


		Three months ended September 30,								Nine months ended September 30,
(dollars in thousands)	(dollars in thousands)	2023			2022			% Change		2023			2022			% Change
		(Unaudited)								(Unaudited)
(dollars in thousands)

(dollars in thousands)
		(Unaudited)
		(Unaudited)
		(Unaudited)
Policy issuance and renewal services
Policy issuance and renewal services
Policy issuance and renewal services	Policy issuance and renewal services
Direct and affiliated assumed premiums written by the Exchange	Direct and affiliated assumed premiums written by the Exchange	$	2,670,186		$	2,271,033		17.6	%	$	7,587,185		$	6,528,996		16.2	%
Direct and affiliated assumed premiums written by the Exchange
Direct and affiliated assumed premiums written by the Exchange
Management fee rate
Management fee rate
Management fee rate	Management fee rate	24.30		%	24.30		%			24.30		%	24.30		%
Management fee revenue	Management fee revenue	648,855			551,861			17.6		1,843,686			1,586,546			16.2
Management fee revenue
Management fee revenue
Change in estimate for management fee returned on cancelled policies (1)	Change in estimate for management fee returned on cancelled policies (1)	194			(195)			NM		(3,208)			(2,333)			(37.5)
Change in estimate for management fee returned on cancelled policies (1)
Change in estimate for management fee returned on cancelled policies (1)
Management fee revenue - policy issuance and renewal services
Management fee revenue - policy issuance and renewal services
Management fee revenue - policy issuance and renewal services	Management fee revenue - policy issuance and renewal services	$	649,049		$	551,666		17.7	%	$	1,840,478		$	1,584,213		16.2	%

Administrative services	Administrative services

Administrative services

Administrative services
Direct and affiliated assumed premiums written by the Exchange
Direct and affiliated assumed premiums written by the Exchange
Direct and affiliated assumed premiums written by the Exchange	Direct and affiliated assumed premiums written by the Exchange	$	2,670,186		$	2,271,033		17.6	%	$	7,587,185		$	6,528,996		16.2	%
Management fee rate	Management fee rate	0.70		%	0.70		%			0.70		%	0.70		%
Management fee rate
Management fee rate
Management fee revenue
Management fee revenue
Management fee revenue	Management fee revenue	18,691			15,897			17.6		53,110			45,703			16.2
Change in contract liability (2)	Change in contract liability (2)	(2,529)			(1,244)			NM		(6,108)			(2,272)			NM
Change in contract liability (2)
Change in contract liability (2)
Change in estimate for management fee returned on cancelled policies (1)
Change in estimate for management fee returned on cancelled policies (1)
Change in estimate for management fee returned on cancelled policies (1)	Change in estimate for management fee returned on cancelled policies (1)	(11)			4			NM		(26)			15			NM

Management fee revenue - administrative services	Management fee revenue - administrative services	16,151			14,657			10.2		46,976			43,446			8.1

Management fee revenue - administrative services

Management fee revenue - administrative services
Administrative services reimbursement revenue
Administrative services reimbursement revenue
Administrative services reimbursement revenue	Administrative services reimbursement revenue	187,118			168,653			10.9		544,411			492,655			10.5
Total revenue from administrative services	Total revenue from administrative services	$	203,269		$	183,310		10.9	%	$	591,387		$	536,101		10.3	%
Total revenue from administrative services
Total revenue from administrative services

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 Part I, Item 1. "Financial Statements - Note 3, Revenue, of Notes to Financial Statements" contained within this report.

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Direct and affiliated assumed premiums written by the Exchange

Direct and affiliated assumed premiums include premiums written directly by the Exchange and premiums assumed from its wholly owned property and casualty subsidiaries. Direct and affiliated assumed premiums written by the Exchange increased ~~17.6%~~19.0% to $2.7 billion in the ~~third~~first quarter of ~~2023~~2024 compared to the ~~third~~first quarter of ~~2022,~~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 ~~6.1%~~7.1% in the ~~third~~first quarter of ~~2023~~2024 compared to ~~3.3%~~4.4% in the ~~third~~first quarter of ~~2022.~~2023. The year-over-year average premium per policy for all lines of business increased ~~8.7%~~10.6% at ~~September 30, 2023~~March 31, 2024 compared to ~~4.1%~~6.4% at ~~September 30, 2022.~~March 31, 2023.

Premiums generated from new business increased ~~39.7%~~32.4% to ~~$403~~$449 million in the ~~third~~first quarter of 2024 compared to the same period in 2023, primarily driven by increased premiums written in the commercial multi-peril, personal auto and homeowners lines. Contributing to this change was a 11.1% increase in new business policies written and a 14.0% increase in year-over-year average premium per policy on new business at March 31, 2024. Premiums generated from new business increased 36.3% to $339 million in the first quarter of 2023 compared to the same period in 2022, primarily driven by increased ~~premiums~~premium written in the personal auto, homeowners and commercial multi-peril ~~and homeowners~~ lines. Contributing to this change was a ~~21.3%~~25.9% increase in new business policies written and a ~~12.1%~~10.3% increase in year-over-year average premium per policy on new business at ~~September 30,~~March 31, 2023. Premiums generated from new business increased 20.9% to $288 million in the third quarter of 2022 compared to the same period in 2021, primarily driven by increased premium written in the personal auto and commercial multi-peril lines. Contributing to this change was a 10.0% increase in new business policies written and a 7.8% increase in year-over-year average premium per policy on new business at September 30, 2022.

Premiums generated from renewal business increased ~~14.4%~~16.7% to $2.3 billion in the ~~third~~first quarter of 2024 compared to the first quarter of 2023 and increased 11.5% to $2.0 billion in the first quarter of 2023 compared to the ~~third~~first quarter of ~~2022 and increased 7.9% to $2.0 billion in the third quarter of 2022 compared to the third quarter of 2021.~~2022. Underlying the trend in renewal business premiums in both periods was ~~an 8.1%~~a 9.9% increase in year-over-year average premium

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per policy at ~~September 30,~~March 31, 2024, and 5.8% at March 31, 2023, ~~and 3.5% at September 30, 2022,~~ as well as an increase in year-over-year policies in force of ~~4.2%~~5.1% and 3.5% in the ~~third~~first quarters of ~~2023~~2024 and ~~2022,~~2023, respectively, driven by ~~a slight~~an increase in the policy retention ratios.

Personal lines – Total personal lines premiums written increased ~~19.6%~~20.6% to $1.9 billion in the ~~third~~first quarter of 2024, compared to 15.8% in the first quarter of 2023, ~~compared to 8.7% in the third quarter of 2022,~~ driven by a ~~9.2%~~12.0% increase in total personal lines year-over-year average premium per policy and a ~~6.6%~~7.5% increase in total personal lines policies in force.

Commercial lines – Total commercial lines premiums written increased ~~12.4%~~15.6% to ~~$727~~$874 million in the ~~third~~first quarter of 2024, compared to 12.2% in the first quarter of 2023, ~~compared to 11.2% in the third quarter of 2022,~~ driven by a ~~10.0%~~9.4% increase in total commercial lines year-over-year average premium per policy and a ~~2.7%~~4.2% 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 ~~its effort~~efforts to ~~expand the size of~~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 and rate changes affect the profitability of the Exchange and have a direct bearing on our management fee revenue. Future premiums could be impacted by potential ~~regulatory~~ changes in regulation and ~~continued~~ inflationary trends, among others. ~~Inflation-driven severity continued~~The Exchange's pricing actions taken in 2023 have contributed to ~~impact underwriting results~~its increased average premium per policy in the ~~third~~first quarter of ~~2023, and will continue to impact future rate decisions.~~2024. See also Part I. Item 1A. "Risk Factors" included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2022~~2023 as filed with the Securities and Exchange Commission on ~~March 1, 2023.~~February 26, 2024.

Table of Contents

Policy issuance and renewal services


		Three months ended September 30,						Nine months ended September 30,
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
(dollars in thousands)	(dollars in thousands)	2023		2022		% Change		2023		2022		% Change
		(Unaudited)						(Unaudited)
(dollars in thousands)
(dollars in thousands)
		(Unaudited)
		(Unaudited)
		(Unaudited)
Management fee revenue - policy issuance and renewal services
Management fee revenue - policy issuance and renewal services
Management fee revenue - policy issuance and renewal services	Management fee revenue - policy issuance and renewal services	$	649,049	$	551,666	17.7	%	$	1,840,478	$	1,584,213	16.2	%
Service agreement revenue	Service agreement revenue	6,620		6,260		5.7		19,408		19,175		1.2
		655,669		557,926		17.5		1,859,886		1,603,388		16.0
Service agreement revenue
Service agreement revenue
		672,200
		672,200
		672,200
Cost of operations - policy issuance and renewal services
Cost of operations - policy issuance and renewal services
Cost of operations - policy issuance and renewal services	Cost of operations - policy issuance and renewal services	523,349		466,111		12.3		1,513,690		1,352,050		12.0
Operating income - policy issuance and renewal services	Operating income - policy issuance and renewal services	$	132,320	$	91,815	44.1	%	$	346,196	$	251,338	37.7	%
Operating income - policy issuance and renewal services
Operating income - policy issuance and renewal services

Policy issuance and renewal services

The management fee revenue allocated for providing policy issuance and renewal services was 24.40% and 24.30% of the direct and affiliated assumed premiums written by the Exchange for ~~both~~the three ~~and nine~~ month periods ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022.~~respectively. This portion of the management fee is recognized as revenue when the policy is issued or renewed because it is at that time that the services we provide are substantially complete and the executed insurance policy is transferred to the customer. The increase in management fee revenue for policy issuance and renewal services was driven by the increase in the direct and affiliated assumed premiums written by the Exchange discussed previously.

Service agreement revenue

Service agreement revenue primarily consists of service charges we collect from subscribers/policyholders for providing multiple payment plans on policies written by the Exchange and its property and casualty subsidiaries and also includes late payment and policy reinstatement fees. The service charges are fixed dollar amounts per billed installment. Service agreement revenue also includes fees received from the Exchange for the use of shared office space. The increase in service agreement revenue for the three ~~and nine~~ month ~~periods~~period ended ~~September 30, 2023~~March 31, 2024 compared to the same ~~periods~~period in ~~2022~~2023 is primarily due to an increase in shared office space revenue.

~~Table of Contents~~

Cost of policy issuance and renewal services


		Three months ended September 30,						Nine months ended September 30,
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
(dollars in thousands)	(dollars in thousands)	2023		2022		% Change		2023		2022		% Change
		(Unaudited)						(Unaudited)
(dollars in thousands)
(dollars in thousands)
		(Unaudited)
		(Unaudited)
		(Unaudited)
Commissions:
Commissions:
Commissions:	Commissions:
Total commissions	Total commissions	$	354,169	$	309,597	14.4	%	$	1,014,121	$	898,215	12.9	%
Total commissions
Total commissions
Non-commission expense:
Non-commission expense:
Non-commission expense:	Non-commission expense:
Underwriting and policy processing	Underwriting and policy processing	$	46,387	$	43,627	6.3	%	$	136,624	$	127,483	7.2	%
Underwriting and policy processing
Underwriting and policy processing
Information technology
Information technology
Information technology	Information technology	51,201		50,345		1.7		162,810		147,117		10.7
Sales and advertising	Sales and advertising	14,355		15,011		(4.4)		43,283		42,007		3.0
Sales and advertising
Sales and advertising
Customer service
Customer service
Customer service	Customer service	8,643		8,675		(0.4)		25,066		25,760		(2.7)
Administrative and other	Administrative and other	48,594		38,856		25.1		131,786		111,468		18.2
Administrative and other
Administrative and other
Total non-commission expense
Total non-commission expense
Total non-commission expense	Total non-commission expense	169,180		156,514		8.1		499,569		453,835		10.1
Total cost of operations - policy issuance and renewal services	Total cost of operations - policy issuance and renewal services	$	523,349	$	466,111	12.3	%	$	1,513,690	$	1,352,050	12.0	%
Total cost of operations - policy issuance and renewal services
Total cost of operations - policy issuance and renewal services

Commissions – Commissions increased ~~$44.6~~$67.0 million in the ~~third~~first quarter of ~~2023 and $115.9 million for the nine months ended September 30, 2023~~2024 compared to the same ~~periods~~period in ~~2022,~~2023, primarily driven by the growth in direct and affiliated assumed written premium ~~partially offset by a decrease~~and an increase in agent incentive compensation. The estimated agent incentive payouts at ~~September 30, 2023~~March 31, 2024 are based on actual underwriting results for the two prior years and current year-to-date actual results and forecasted results for the remainder of ~~2023.~~2024. The profitability component of agent incentive compensation ~~decreased~~increased due to ~~higher claims severity~~improved actual and ~~related~~forecasted loss ~~costs~~ratios in ~~the three-year period ending 2023 compared to the three-year period ended 2022.~~2024.

Non-commission expense – Non-commission expense increased ~~$12.7~~$14.3 million in the ~~third~~first quarter of ~~2023~~2024 compared to the ~~third~~first quarter of ~~2022.~~2023. Underwriting and policy processing expense increased ~~$2.8~~$4.4 million primarily due to increased underwriting report and personnel costs. Information technology costs decreased $3.7 million primarily due to an increase in capitalized professional fees and personnel costs related to technology initiatives. Sales and advertising expense increased ~~$0.9~~$4.3 million primarily due to increased ~~professional fees.~~agent-related costs. Administrative and other costs increased ~~$9.7~~$7.2 million primarily due to an increase in personnel ~~costs~~ and ~~professional fees.~~

Non-commission expense increased $45.7 million in the nine months ended September 30, 2023 compared to the same period in 2022. Underwriting and policy processing expense increased $9.1 million primarily due to increased underwriting report, personnel, and postagetravel costs. Information technology costs increased $15.7 million primarily due to increased professional fees, hardware and software costs, and personnel costs. Administrative and other costs increased $20.3 million primarily due to an increase in personnel costs. Personnel costs in both the third quarter and nine months ended September 30, 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 in both periods were driven by improved direct written premium and policies in force growth and a higher company stock price at September 30, 2023 compared to September 30, 2022.

~~Administrative services~~

Three months ended September 30, Nine months ended September 30,
(dollars in thousands) 2023 2022 % Change 2023 2022 % Change
(Unaudited) (Unaudited)
Management fee revenue - administrative services $ 16,151 $ 14,657 10.2 % $ 46,976 $ 43,446 8.1 %
Administrative services reimbursement revenue 187,118 168,653 10.9 544,411 492,655 10.5
Total revenue allocated to administrative services 203,269 183,310 10.9 591,387 536,101 10.3
Administrative services expenses
Claims handling services 163,164 146,097 11.7 470,959 427,483 10.2
Investment management services 9,148 9,273 (1.4) 26,366 28,264 (6.7)
Life management services 14,806 13,283 11.5 47,086 36,908 27.6
Operating income - administrative services $ 16,151 $ 14,657 10.2 % $ 46,976 $ 43,446 8.1 %

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Administrative services


	Three months ended March 31,
(dollars in thousands)	2024		2023		% Change
	(Unaudited)
Management fee revenue - administrative services	$	16,934	$	15,189	11.5	%
Administrative services reimbursement revenue	191,567		172,827		10.8
Total revenue allocated to administrative services	208,501		188,016		10.9
Administrative services expenses
Claims handling services	167,963		148,200		13.3
Investment management services	8,593		8,745		(1.7)
Life management services	15,011		15,882		(5.5)
Operating income - administrative services	$	16,934	$	15,189	11.5	%

Administrative services

The management fee revenue allocated to administrative services was 0.60% and 0.70% of the direct and affiliated assumed premiums written by the Exchange for ~~both~~ the three ~~and nine~~ month periods ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022.~~respectively. This portion of the management fee is recognized as revenue over a four-year period representing the time over which the services are provided. We also report reimbursed costs as revenues, which are recognized monthly as services are provided. The administrative services expenses we incur and the related reimbursements we receive are recorded gross in the Statements of Operations.

Cost of administrative services

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Total investment income (loss)

A summary of the results of our investment operations is as ~~follows:~~follows for the three months ended March 31:


		Three months ended September 30,						Nine months ended September 30,
		2024

		2024

		2024
(dollars in thousands)	(dollars in thousands)	2023		2022		% Change		2023		2022		% Change
		(Unaudited)						(Unaudited)
(dollars in thousands)
(dollars in thousands)
Net investment income	Net investment income	$	14,642	$	5,834	NM	%	$	30,360	$	24,606	23.4	%
Net realized and unrealized investment losses		(2,227)		(6,230)		64.3		(9,246)		(23,833)		61.2
Net investment income
Net investment income
Net realized and unrealized investment gains (losses)
Net realized and unrealized investment gains (losses)
Net realized and unrealized investment gains (losses)
Net impairment losses recognized in earnings
Net impairment losses recognized in earnings
Net impairment losses recognized in earnings	Net impairment losses recognized in earnings	(113)		(175)		(35.2)		(1,917)		(429)		NM
Total investment income (loss)	Total investment income (loss)	$	12,302	$	(571)	NM	%	$	19,197	$	344	NM	%
Total investment income (loss)
Total investment income (loss)

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 ~~$8.8 million and $5.8~~$13.7 million in the ~~third~~first quarter ~~and nine months ended September 30, 2023,~~of 2024, compared to the same ~~periods~~period in ~~2022. The increase in the third quarter of~~ 2023, ~~was~~ primarily due to ~~a decrease~~higher equity in earnings of limited ~~partnership losses~~partnerships and an increase in bond income ~~due to~~as a result of higher yields. ~~The increase for the nine months ended September 30, 2023 was primarily due to an increase~~Included in ~~bond and cash and cash equivalent~~net investment income ~~driven by higher yields and increased rates, partially offset by an increase in~~is $0.5 million of limited partnership ~~losses. Net investment income included limited partnership~~earnings in the first quarter of 2024 compared to losses of ~~less than $0.1 million in the third quarter of 2023 compared to $4.6~~$10.8 million for the same period in ~~2022 and $10.7 million of limited partnership losses for the nine months ended September 30, 2023, compared to $2.2 million for the same period in 2022.~~2023.

Net realized and unrealized investment ~~losses~~gains (losses)

A breakdown of our net realized and unrealized investment gains (losses) ~~gains~~ is as ~~follows:~~follows for the three months ended March 31:


		Three months ended September 30,				Nine months ended September 30,
(in thousands)	(in thousands)	2023		2022		2023		2022

(in thousands)

(in thousands)
Securities sold:
Securities sold:
Securities sold:	Securities sold:	(Unaudited)				(Unaudited)
Available-for-sale securities	Available-for-sale securities	$	(2,480)	$	(4,606)	$	(6,195)	$	(9,108)
Available-for-sale securities
Available-for-sale securities
Equity securities	Equity securities	91		243		(2,636)		(1,327)
Equity securities change in fair value		153		(1,867)		(424)		(13,400)
Miscellaneous		9		0		9		2
Net realized and unrealized investment losses		$	(2,227)	$	(6,230)	$	(9,246)	$	(23,833)
Equity securities
Equity securities
Change in fair value on remaining equity securities
Change in fair value on remaining equity securities
Change in fair value on remaining equity securities

Net realized and unrealized investment gains (losses)

Net realized and unrealized investment gains (losses)

Net realized and unrealized investment gains (losses)

Net realized and unrealized ~~losses~~gains of $1.9 million during the ~~three~~first quarter of 2024 were primarily due to market value adjustments in the preferred stock portfolio. Net realized and ~~nine months ended September 30,~~unrealized losses of $5.3 million during the same period in 2023 were primarily due to ~~disposals of available-for-sale securities. The nine months ended September 30, 2023 also included~~ disposals of equity securities impacted by the banking industry events ~~in the first quarter~~as well as disposals of ~~2023. Net realized~~available-for-sale securities and ~~unrealized losses during the same periods in 2022 were primarily due to~~ market value adjustments on equity ~~securities and disposals of available-for-sale~~ securities.

Net impairment losses recognized in earnings

Net impairment losses ~~during~~of $2.7 million in the ~~three and nine months ended September 30, 2023 and 2022 were~~first quarter of 2024 include $2.2 million of current expected credit losses recognized on held-to-maturity securities. See "Other assets" in Part I, Item 1. "Financial Statements - Note 2, Significant Accounting Policies, of Notes to Financial Statements" for additional information. The first quarter of 2024 also includes $0.3 million related to available-for-sale securities ~~in an unrealized loss position~~ where we had both the intent to sell prior to ~~recover~~recovery of our amortized cost basis ~~as well as~~and credit-related impairment losses. Net impairment losses of $1.6 million in the first quarter of 2023 included $1.4 million of intent to sell related impairments and $0.2 million of credit ~~impairment losses.~~impairments on available-for-sale securities.

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Financial ~~condition~~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 ~~Company~~ through assessing its financial stability and ability to pay claims. The ratings are generally based upon factors relevant to policyholders and are not directed toward return to investors. The Exchange and each of its property and casualty subsidiaries are rated A+ "Superior", the second highest financial strength rating, which is assigned to companies that have achieved superior overall performance when compared to the standards established by A.M. Best and have a superior ability to meet obligations to policyholders over the long term. On August 10, 2023, the outlook for the financial strength rating was affirmed as stable. As of December 31, ~~2022,~~2023, only approximately 12% of insurance groups, in which the Exchange is included, are rated A+ or higher.

The financial statements of the Exchange are prepared in accordance with statutory accounting principles prescribed by the Commonwealth of Pennsylvania. Financial statements prepared under statutory accounting principles focus on the solvency of the insurer and generally provide a more conservative approach than under U.S. generally accepted accounting principles. Statutory direct written premiums of the Exchange and its wholly owned property and casualty subsidiaries grew ~~16.2%~~19.0% to ~~$7.6~~$2.7 billion in the first ~~nine~~three months of ~~2023~~2024 compared to the first ~~nine~~three months of ~~2022.~~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 ~~$9.1~~$9.5 billion at ~~September 30, 2023~~March 31, 2024 and ~~$10.1~~$9.3 billion at December 31, ~~2022.~~2023. The Exchange and its wholly owned property and casualty subsidiaries' year-over-year policy retention ratio continues to be high at ~~91.1%~~91.2% at ~~September 30, 2023~~both March 31, 2024 and ~~90.5% at~~ December 31, ~~2022.~~2023.

We have prepared our financial statements considering the financial strength of the Exchange based on its A.M. Best rating and strong level of surplus. See Part I. Item 1A. "Risk Factors" included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2022~~2023 as filed with the Securities and Exchange Commission on ~~March 1, 2023~~February 26, 2024 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)	(dollars in thousands)		September 30, 2023		% to total		December 31, 2022		% to total		(dollars in thousands)	March 31, 2024			% to total					December 31, 2023				% to total
			(Unaudited)
Fixed maturities			$	915,237	85	%	$	894,661	84	%
		(Unaudited)																	(Unaudited)
Available-for-sale securities											Available-for-sale securities	$	969,645		84		%			$	961,241			85	%
Equity securities	Equity securities		79,516		7		72,560		7
Agent loans (1)	Agent loans (1)		68,192		6		69,476		7
Other investments			17,196		2		30,511		2
Other investments (2)
Total investments	Total investments		$	1,080,141	100	%	$	1,067,208	100	%	Total investments	$	1,152,045	100		100		%			$	1,136,307	100		100	%

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

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

Fixed maturities

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

~~Fixed maturities~~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 fixed maturities, net of deferred taxes, totaled ~~$49.7~~$25.5 million at ~~September 30, 2023,~~March 31, 2024, compared to ~~$52.5~~$24.7 million at December 31, ~~2022.~~2023.

The following table presents a breakdown of the fair value of our fixed maturity portfolio by industry sector and rating as of:


(in thousands)	(in thousands)		September 30, 2023 (1)												(in thousands)	March 31, 2024 (1)
			AAA		AA		A		BBB		Non- investment grade		Fair value
			(Unaudited)
		AAA															AAA	AA	A	BBB		Non- investment grade	Fair value
		(Unaudited)																			(Unaudited)
Basic materials	Basic materials		$	0	$	0	$	919	$	4,277	$	5,981	$	11,177
Communications	Communications		0		2,845		13,502		11,360		14,293		42,000
Consumer	Consumer		0		1,926		16,537		72,127		36,663		127,253
Diversified	Diversified		0		0		0		0		186		186
Energy	Energy		0		0		3,771		19,370		9,340		32,481
Financial	Financial		0		1,998		94,085		117,595		12,586		226,264

Government-municipal (2)

Government-municipal (2)

Government-municipal (2)

Industrial	Industrial		0		0		7,741		18,214		24,152		50,107
Structured securities (2)			124,505		182,051		24,139		16,529		162		347,386

Industrial

Industrial
Structured securities (3)
Technology	Technology		1,858		0		2,946		20,765		12,780		38,349

U.S. Treasury
Utilities	Utilities		0		0		3,118		33,175		3,741		40,034
Total	Total		$	126,363	$	188,820	$	166,758	$	313,412	$	119,884	$	915,237

(1)Ratings are supplied by S&P, Moody’s, and ~~Fitch.~~Fitch with the exception of Government-municipal, which is unrated. The table is based upon the lowest rating for each security.

(2)Includes held-to-maturity securities totaling $4.8 million, which are included in the line item "Other assets, net" in the Statement of Financial Position.

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

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Equity securities

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

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

(in thousands)

September 30, 2023

December 31, 2022

(Unaudited)

(in thousands)

(Unaudited)

Financial services

65,071

61,084

Utilities

7,291

5,708

Utilities

Energy

4,131

3,576

Consumer

2,288

1,854

Consumer

Technology

500

Industrial

177

Industrial

Communications

338

Total

79,516

72,560

Total

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 ~~pressures~~ and ~~rising~~ interest ~~rates. We maintain relationships and cash balances at diversified and well-capitalized financial institutions and have established processes to monitor them.~~rate environment. While we did not see a significant impact on our sources or uses of cash in the first ~~nine months~~quarter of ~~2023,~~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 October 2026. 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, ~~2022~~2023 as filed with the Securities and Exchange Commission on ~~March 1, 2023.~~February 26, 2024.

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 8, Postretirement Benefits, of Notes to Financial Statements" contained within this report for the funding policy and related contribution for our defined benefit pension ~~plan funding policy.~~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. Volatility in these markets could impair our ability to sell certain fixed income securities or cause such securities to sell at deep discounts. We believe we have sufficient liquidity to meet our needs from sources other than the liquidation of securities.

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Cash flow activities

The following table provides condensed cash flow information as follows for the ~~nine~~three months ended ~~September 30:~~March 31:


(in thousands)	(in thousands)		2023		2022
			(Unaudited)
(in thousands)

(in thousands)							2024	2023
		(Unaudited)							(Unaudited)
Net cash provided by operating activities	Net cash provided by operating activities		$	232,769	$	238,108
Net cash used in investing activities	Net cash used in investing activities		(105,730)		(74,997)
Net cash used in financing activities	Net cash used in financing activities		(166,256)		(249,149)
Net decrease in cash and cash equivalents			$	(39,217)	$	(86,038)
Net increase (decrease) in cash, cash equivalents, and restricted cash

Net cash provided by operating activities was ~~$232.8~~$87.2 million in the first ~~nine~~three months of ~~2023,~~2024, compared to ~~$238.1~~$48.0 million for the same period in ~~2022. Decreased~~2023. Increased cash provided by operating activities was primarily due to an increase in cash paid for agent commissions of $117.8 million due to higher scheduled commissions driven by premium growth, and increases in pension and employee benefits paid of $93.8 million and general operating expenses paid of $39.8 million driven by higher hardware and software costs and information technology-related professional fees. ~~Pension contributions totaled $95.0 million in 2023 compared to $25.0 million in 2022.~~ ~~Partially offsetting this decrease in cash provided by operating activities was an increase in~~ management fees received of ~~$225.0~~$106.4 million driven by growth in direct and affiliated assumed premiums written by the Exchange and a decrease in agent ~~bonuses~~incentive compensation paid of ~~$18.7~~$26.5 million. This was partially offset by increases in cash paid for agent commissions of $53.2 million driven by premium growth and pension and employee benefits paid of $34.3 million primarily due to a $33.0 million pension contribution in 2024.

Net cash used in investing activities was ~~$105.7~~$27.0 million in the first ~~nine~~three months of ~~2023,~~2024, compared to ~~$75.0~~$12.3 million for the same period in ~~2022. Increased~~2023. In 2024 and 2023, net cash used in investing activities was primarily ~~due to an increase in~~driven by fixed asset purchases of ~~$21.2~~$22.4 million and ~~an increase in purchases of equity securities of $13.2 million.~~ ~~The decrease in proceeds from sales~~$19.1 million, respectively, mostly related to software and ~~maturities/calls of available-for-sale securities was mostly offset by a similar decrease in purchases of those securities.~~home office renovations.

Net cash used in financing activities was ~~$166.3~~$59.4 million in the first ~~nine~~three months of ~~2023,~~2024, compared to ~~$249.1~~$55.4 million for the same period in ~~2022. Decreased cash used in financing activities was primarily~~2023, due to ~~activity during the first nine months of 2022, which included~~ ~~repayment of the remaining $93.2 million balance~~dividends paid to shareholders. We increased both our Class A and Class B shareholder regular quarterly dividends by 7.1% for 2024, compared to 2023. There are no regulatory restrictions on the ~~term loan credit facility in May 2022.~~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, including under current inflationary conditions and ~~rising~~a higher interest ~~rates.~~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 ~~$87.5~~$128.0 million at ~~September 30, 2023,~~March 31, 2024, 2) $100 million available bank revolving line of credit, and 3) liquidation of unpledged assets held in our investment portfolio, including ~~preferred stock~~equity securities and investment grade bonds which totaled approximately ~~$759.4~~$801.1 million at ~~September 30, 2023.~~March 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.

As of ~~September 30, 2023,~~March 31, 2024, we have access to a $100 million bank revolving line of ~~credit with a $25 million letter~~credit. See Part I, Item 1. "Financial Statements - Note 7, Bank Line of ~~credit sublimit that expires on October 29, 2026. As~~Credit, of ~~September 30, 2023, a total of $99.1 million remains available under the facility due~~Notes to ~~$0.9 million outstanding letters of credit, which reduce the availability~~Financial Statements" contained within this report for letters of credit to $24.1 million. We had no borrowings outstanding on our line of credit as of September 30, 2023. Investments with a fair value of $114.2 million were pledged as collateral on the line of credit at September 30, 2023. These investments have no trading restrictions and are reported as available-for-sale securities and cash and cash equivalents in the Statement of Financial Position. The bank requires compliance with certain covenants, which include leverage ratios and debt restrictions. We were in compliance with all covenants at September 30, 2023.additional information.

Off-Balance Sheet Arrangements

We have entered into certain contingent obligations for guarantees. See Part I, Item 1. "Financial Statements - Note 13, Commitments and Contingencies, of Notes to 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 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 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, ~~2022~~2023 of our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on ~~March 1, 2023.~~February 26, 2024. See Part I, Item 1. "Financial Statements - Note 5, Fair Value, of Notes to 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, ~~2022~~2023 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 ~~March 1, 2023.~~February 26, 2024.

The current inflationary environment, rising interest rates, 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 ~~nine~~three months ended ~~September 30, 2023.~~March 31, 2024. 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 ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 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, ~~pursuant to~~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, ~~pursuant to~~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 ~~intends to vigorously defend against all~~filed a Petition for Writ of Certiorari with the Supreme Court of the ~~allegations and requests~~United Stated. The Petition seeks 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 ~~relief in the complaint.~~Writ of Certiorari.

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

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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.

~~Table~~ After the denial of ~~Contents~~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, but the court later stayed that order, in light of a notice of appeal filed by plaintiffs.

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 13, Commitment and Contingencies, of Notes to 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, ~~2022~~2023 as filed with the Securities and Exchange Commission on ~~March 1, 2023.~~February 26, 2024.

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 ~~September 30, 2023:~~March 31, 2024:


(dollars in thousands, except per share data)	(dollars in thousands, except per share data)
Period	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
Period
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

July 1-31, 2023		—	$	—	—	$	17,754
August 1-31, 2023 (1)		1,445	220.79		—	17,754
September 1-30, 2023		—	—		—	17,754
January 1-31, 2024
January 1-31, 2024
January 1-31, 2024
February 1-29, 2024
March 1-31, 2024 (1)
Total	Total	1,445	220.79		—

(1)Represents shares purchased on the open market to fund the rabbi trust for the outside director deferred stock compensation plan.

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ITEM 6. EXHIBITS


Exhibit
Number						Description of Exhibit

10.1+*						~~Supplemental Retirement Plan for Certain Members of the Erie Insurance Group Retirement Plan for Employees (Amended and Restated as of January 1, 2023), dated August 15, 2023.~~

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).

* Indicates management compensatory plan, contract, or arrangement.

+ 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:

~~October 26, 2023~~April 25, 2024

By:

/s/ Timothy G. NeCastro

Timothy G. NeCastro, President & CEO

By:

/s/ Julie M. Pelkowski

Julie M. Pelkowski, Executive Vice President & CFO

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(in thousands)	Beginning balance at June 30, 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 September 30, 2022
Available-for-sale securities:
Corporate debt securities	$	6,109	$	(7)	$	(28)	$	753	$	(495)	$	2,899	$	(1,956)	$	7,275

Commercial mortgage-backed securities	8,871		(188)		(413)		0		(660)		1,174		(3,417)		5,367
Residential mortgage- backed securities	42,549		(667)		(1,708)		0		(6,626)		674		(30,560)		3,662

Total available-for-sale securities	57,529		(862)		(2,149)		753		(7,781)		4,747		(35,933)		16,304
Equity securities	1,866		(18)		—		0		0		0		0		1,848
Total Level 3 securities	$	59,395	$	(880)	$	(2,149)	$	753	$	(7,781)	$	4,747	$	(35,933)	$	18,152