ERIE 10-K & 10-Q changes, risk factors and insider trading

We are dependent upon management fees we retain, which represent our principal source of revenue. In accordance with the subscriber's agreement with the subscribers at the Exchange, we may retain up to 25% of all direct and affiliated assumed premiums written by the Exchange. Therefore, management fee revenue from the Exchange is calculated by multiplying the management fee rate by the direct and affiliated assumed premiums written by the Exchange. Accordingly, any reduction in direct and affiliated assumed premiums written by the Exchange and/or the management fee rate could have a negative effect ondecrease our revenues and net income.

The management fee rate is set at least annually by our Board of Directors and may not exceed 25% of the direct and affiliated assumed premiums written by the Exchange. The process of setting the management fee rate includes, but is not limited to, the evaluation of current year operating results compared to both prior year and industry estimated results for both Indemnity and the Exchange, and consideration of several factors for both entities including, but not limited to: their relative financial strength and capital position; projected revenue, expense and earnings for the subsequent year; future capital needs; as well as competitive position. The evaluation of these factors could result in a reduction to the management fee rate and our revenues and profitability could be materially adversely affected. Regulatory or other third-party action affecting the management fee rate could also materially adversely affect our revenues and profitability.

Unfavorable changes in macroeconomic conditions for any reason, including declining consumer confidence, inflation, high unemployment, lower demand for certain services, reduced personal income, and 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.fee revenue.

The direct written premium of the Exchange is impacted by the premium rates charged for policies. The Exchange writes policies almost exclusively with annual terms, therefore, premium rate actions take 12 months to be fully recognized in written premium. The Exchange also writes certain personal auto policies with a rate locking feature. These product features generally extend the amount of time it takes for premium rate actions to be recognized related to these policies, affecting the premium revenue of the Exchange, and consequently our management fee.fee revenue.

The Exchange maintains a brand recognized for customer service, which is the result of Indemnity's management of the Exchange in accordance with the subscriber's agreement. The perceived performance, actions, conduct and behaviors of employees, independent insurance agency representatives, and third-party service providers may result in reputational harm to the Exchange's brand. Specific incidents which may cause harm include but are not limited to disputes, long customer wait times, errors in processing a claim, failure to protect sensitive customer data, and negative or inaccurate social media or traditional media communications. Likewise, an inability to match or exceed the service provided by competitors, who are increasingly relying on digital delivery and enhanced distribution technology, may impede the Exchange’sExchange's ability to maintain and/or grow its customer base. If an extreme catastrophic event were to occur in a heavily concentrated geographic area of subscribers (policyholders), an extraordinarily high number of claims could have the potential to strain claims processing and affect the Exchange's ability to service its customers. If third-party service providers fail to perform as anticipated, the Exchange may experience operational difficulties, increased costs, and reputational damage. Similarly, the Exchange’sExchange's brand could be tarnished by reactions to business practices, adverse financial developments, perceptions of our corporate governance, and how we address employee matters and concerns, environmental, social and governance (ESG) initiatives, or the conduct of our employees, officers and directors.directors, or environmental, social and governance (ESG) practices, including corporate diversity, equity and inclusion (DEI) initiatives. Failure to satisfy expectations in these areas may result in negative publicity or other adverse outcomes, which could be aggravated as the expectations of consumers, regulators and other stakeholders evolve and as social media and other forms of modern communication rapidly magnify reactions. Any reputational harm to the Exchange could have the potential to impair its ability to grow and renew its business.

Financial strength ratings are an important factor in establishing the competitive position of insurance companies such as the Exchange. Higher ratings generally indicate greater financial stability and a stronger ability to meet ongoing obligations to policyholders. The Exchange's A.M.AM Best rating is currently A+ ("SuperiorExcellent"). A.M.AM Best periodically reviews the Exchange’sExchange's ratings and changes their rating criteria; therefore, the Exchange's current rating may not be maintained in the future. A significant downgrade in the A.M.AM Best rating could reduce the competitive position of the Exchange, making it more difficult to attract profitable business in the highly competitive property and casualty insurance market and potentially result in reduced sales of its products and lower premium revenue.

Property and casualty insurers face a significant risk of litigation and state and federal regulatory investigations, inquiries and actions in the ordinary course of operating their businesses, including the risk of class action lawsuits. Plaintiffs in class action and other lawsuits against the Exchange may seek large or indeterminate amounts of damages, including punitive and treble damages, the ultimate amounts of which may remain unknown for substantial periods of time.

The uncertainty of risks that emerge upon the occurrence of significant unexpected events, such as pandemics, or unexpected economic or social inflation caused by supply chain issues, changes in tariffs, societal trends, or otherwise, may cause additional challenges in the process of estimating loss and loss adjustment expense reserves or premiums to accommodate future claims and expenses. For example, the behavior of claimants and policyholders and the timing and amounts of claims settlements may change in unexpected ways,policyholders, including increased attorney involvement and third-party litigation financing, which could result in largehigher jury awards. Furthermore, actions taken by governmental bodies, both legislative and regulatory, in reaction to significant unexpected events, and their related impacts, are hard to predict. Technology advancements, such as electric and autonomous vehicles, could impact frequency or severity of losses. The models that are used to determine appropriate premium levels, forecast future losses and expenses, estimate loss and loss adjustment expense reserves, and assess financial strength may be created or deployed in a manner that results in inaccurate predictions. Additionally, as the Exchange writes policies almost exclusively with annual terms, premium rate actions take 12 months to be fully recognized in written premium and another 12 months to earn the increased or decreased premiums in full. The Exchange also writes certain personal auto policies with a rate locking feature, which generally extends the amount of time it takes for premium rate actions to be recognized related to these policies. These risks may result in changes to the Exchange's estimated level of loss and loss adjustment expense reserves or impact the adequacy of premiums to accommodate future claims and expenses.

As insurance industry practices and legal, judicial, social and other environmental conditionsfactors change, unexpected and unintended issues related to claims and coverage may emerge. In some instances, these emerging issues may not become apparent for some time after the Exchange has issued the affected insurance policies. As a result, the full extent of liability under the Exchange's insurance policies may not be known for many years after the policies are issued. These issues may adversely affect the Exchange's business by either extending coverage beyond its underwriting intent or by increasing the number or size of claims. If there were legislative action in response to a pandemic or other significant unexpected event that retroactively mandated coverage irrespective of terms, exclusions or other conditions included in policies that would otherwise preclude coverage, it could have a material impact on the financial condition, results of operations and cash flows of the Exchange.

The Exchange's insurance operations are exposed to claims arising out of catastrophes. Common natural catastrophic events in the Exchange's footprint include hurricanes,tropical cyclones, earthquakes, tornadoes,severe hailconvective storms, and severe winter weather. Additional perils that the Exchange is exposed to through its assumed property reinsurance portfolio include wildfires, tsunamis, and floods. The frequency and severity of these catastrophes are inherently uncertain. Changing climate conditions have created additional uncertainty regarding the future trends in the frequency and severity of natural disasters. Increases in the insured value and geographic concentration of exposures, as well as the impact of inflation, may increase the severity of catastrophe losses. A single catastrophic occurrence or aggregation of multiple smaller occurrences within the geographical region of the Exchange or its assumed property reinsurance portfolio could adversely affect the financial condition of the Exchange. Man-made disasters such as terrorist attacks and riots could also cause losses from insurance claims related to the property and casualty insurance operations, which could adversely affect its financial condition.

Commissions to independent agents are our largest expense. Commissions include scheduled commissions to agents based upon premiums written as well as incentive compensation, which is earned by achieving certain targeted measures. Changes to commission rates or incentive programs may result in increased future costs and lower profitability. Our agent incentive compensation includes a property and casualty underwriting profitability component. IfAny significant decrease in claims frequency and loss expenses werecould to decrease significantly as a result of an unexpected event, such as a pandemic,improve the profitability componentcomponent, ofresulting ourin agent incentive compensation would improve, and ourincreased agent compensation costs would increase.costs. Our second largest expense category includes employee costs such as salaries, healthcare, pension, and other benefit costs. Regulatory developments, provider relationships, pandemics and demographic and economic factors that are beyond our control, such as inflation,inflation and increased labor market competition, are indicators that employee costs could increase, which could reduce our profitability or impact our personnel strategy. The defined benefit pension plan we offer to our employees is affected by variable factors such as the interest rate used to discount pension liabilities, asset performance, and changes in retirement patterns, which are beyond our control, and any related future cost increases could reduce our profitability.

If we are unable to attract, develop, retain, and retainprotect talented executives, key managers, and employees our financial condition and results of operations could be adversely affected.

Our success is largely dependent upon our ability to attract and retain talented executives and other key management. Talent is defined as people with the right skills, knowledge, abilities, character, and motivation. The loss of the services and leadership of certain key officers and the failure to plan for turnover or retirement or to attract and develop talented new executives and managers could prevent us from successfully communicating, implementing, and executing business strategies. Additionally, our executives and other key management may be subject to physical or cyber threats, which if realized, could adversely affect our business operations.

Our success also depends on our ability to attract, develop, and retain a talented employee base. The inability to staff all functions of our business with employees possessing the appropriate talent could have an adverse effect on our business performance. Additionally, failure to recognize, evaluate, and respond to changing workforce trends including current labor market conditions and new ways of managing in hybrid work environments, or failure to execute proactive retention and replacement strategies could also have an adverse effect on our business performance. Furthermore, failure to instill appropriate cultural expectations and behavioral norms within our employees, particularly in a hybrid work environment, could damage our reputation. Staffing appropriately talented employees for the handling of claims and servicing of customers, rendering of disciplined underwriting, and effective sales and marketing are critical to the core functions of our business. In addition, talented employees with specialized skills in actuarial, finance, human resources, law, risk management and information technology, including artificial intelligence and data analytics, are also essential to support and grow our core functions.

In the normal course of business, we collect, use, store and where appropriate, disclose data concerning individuals and businesses. We also conduct business using third parties who may provide software, data storage, cloud-based computing and other technology services. Our systems regularly face cyber threats, which can create significant risks such as destruction of systems or data, denial or interruption of service, disruption of transaction execution, loss or exposure of customer data, theft or exposure of our intellectual property, theft of funds or disruption of other important business functions. Even with appropriate governance and controls, the use of artificial intelligence may increase our exposure to cyber threats. Our interactions with, and reliance upon, third partiesparties, including our independent agents, expose us to increased risk related to data security, service disruptions or effectiveness of our control system, particularly as we increase our reliance on cloud-based computing and software-as-a-service from third parties to operate our business. If we experience service disruptions or need to replace essential third-party software or services, we may not be able to find a viable alternative, or alternatives may be costly and/or require significant time and resources to integrate with our systems, which could negatively impact our operations or financial results.

We have established business continuity and disaster recovery plans to provide for the continuation of core business operations in the event that normal business operations could not be performed due to catastrophic or other events, including pandemics.pandemics and cyber attacks. While we continue to test and assess our business continuity and disaster recovery plans to validate they meet the needs of our core business operations and address multiple business interruption events, there is no assurance that core business operations could be performed upon the occurrence of such an event. Employee absence, physical premises damage, systems failures or outages could compromise our ability to perform our business functions in a timely manner, which could harm our ability to conduct business and hurt our business and customer relationships. While we also maintain business interruption insurance to mitigate the financial risk around disruptions to our core business operations, such insurance may not cover all costs associated with a disruption, and such insurance may become prohibitively expensive to maintain. Our operational resiliency is also dependent on third-party personnel, infrastructure and systems on which we rely, including cloud-based technologies and software-as-a-service applications. Our operations and those of our third parties may become vulnerable to damage or disruption due to circumstances beyond our or their control, such as from catastrophic events, power anomalies or outages, natural disasters, pandemics, supply chain interruptions, network failures, and cyber attacks. Additionally, we are dependent on internet and telecommunications access and capabilities. Our workforce is largely concentrated in Erie, Pennsylvania. If a significant event affects the labor force in this area, it could impact the policy acquisition, underwriting, claims and/or support services provided to the policyholders and/or independent agents of the Exchange. Disruptions to our workforce or our operations for any reason could result in a material adverse effect on our business, cash flows, financial condition, or results of operations.

Our activities are subject to extensive regulation under federal and state laws on matters as diverse as internal control over financial reporting and disclosure controls, securities regulation, data privacy and protection, cybersecurity, taxation, immigration, wage-and-hour standards and employment and labor relations. These laws and regulations are complex and evolving, and compliance with these laws requires significant resources. In some cases, these laws and regulations may increase our costs, negatively impact revenues, or impose operational limitations on our business. Further, there can be no assurance that we, our third-party service providers and our independent agents are in full compliance with all applicable laws and regulations at all times. Efforts at compliance with all laws and regulations are further complicated by new and evolving regulations regarding cybersecurity, artificial intelligence and ESG matters.matters, including DEI-related items. For example, recent changes in the U.S. regulatory environment relating to ESG matters has increased scrutiny of corporate ESG practices. Failure to effectively address current and future ESG regulatory developments and stakeholder expectations may expose our business to litigation, fines, penalties, and damage to our reputation, which, if material could adversely affect our financial condition and results of operations.

WeAdditionally, we face a significant risk of litigation and regulatory investigations and actions in the ordinary course of operating our businesses including the risk of class action lawsuits. We are, have been, or may become subject to class actions and individual suits alleging breach of fiduciary or other duties, including our obligations to indemnify directors and officers in connection with certain legal matters. We are also subject to litigation arising out of our general business activities such as contractual and employment relationships and claims regarding the infringement of the intellectual property of others, whether by us or our third-party service providers. Plaintiffs in class action and other lawsuits against us may seek large or indeterminate amounts of damages, including punitive and treble damages, which may remain unknown for substantial periods of time. We are also subject to various regulatory inquiries, such as information requests, subpoenas, and books and record examinations from state and federal regulators and authorities. In addition, changes in the way regulators administer applicable laws, tax statutes, or regulations could adversely impact our business, cash flows, results of operations, or financial condition.

General economic conditions, geopolitical events, fiscalfiscal, trade, and monetary policy and other factors beyond our control can adversely affect the value of our investments and the realization of net investment income or result in realized investment losses. In addition, downward economic trends also may have an adverse effect on our investment results by negatively impacting the business conditions and impairing credit for the issuers of securities held in our respective investment portfolios. This could reduce fair values of investments and generate significant unrealized losses or impairment charges which may adversely affect our financial results.

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 audited financial statements and related notes and all other items contained within this Annual Report on Form 10-K as these contain important information helpful in evaluating our financial condition and results of operations. This section of the Form 10-K generally discusses 2025 and 2024 results and year-to-year comparisons between 2025 and 2024. For a discussion of 2023 results and year-to-year comparisons between 2024 and 2023 refer to Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" for the year ended December 31, 2024 as contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2025.

◦emergence of significant unexpected events, including pandemics andpandemics, economic or social inflationinflation, and changes in tariff policies;

•ability to attractattract, develop, retain, and retainprotect talented management and employees;

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

In accordance with the subscriber’ssubscriber's agreement for acting as attorney-in-fact in these two capacities, we retain a management fee. Management fee revenue is based upon all direct and affiliated assumed premiums written by the Exchange and the management fee rate, which is not to exceed 25%. Our Board of Directors establishessets the management fee rate at least annually, generally in December for the following year. The process of setting the management fee rate includes, but is not limited to, the evaluation of current year operating results compared to both prior year and industry estimated results for both Indemnity and the Exchange, and consideration of several factors for both entities including, but not limited to: their relative financial strength and capital position; projected revenue, expense and earnings for the subsequent year; future capital needs; as well as competitive position. The management fee rate was set at 25% for 2024, 20232025 and 2022.2024. Based on analysis of the foregoing factors, our Board of Directors set the 20252026 management fee rate again at 25%.

Our earnings are primarily driven by the management fee revenue generated for the services we provide on behalf of the subscribers at the Exchange. The policy issuance and renewal services we provide are related to the sales, underwritingunderwriting, and issuance of policies. The sales related services we provide include agent compensation and certain sales and advertising support services. Agent compensation includes scheduled commissions to agents based upon premiums written as well as incentive compensation, which is earned by achieving targeted measures. Agent compensation comprised approximately 69%71% of our 20242025 policy issuance and renewal expenses. The underwriting services we provide include underwriting and policy processing and comprised approximately 9%8% of our 20242025 policy issuance and renewal expenses. The remaining services we provide include customer service and administrative support. We also provide information technology services that support all the functions listed above that comprised approximately 9%10% of our 20242025 policy issuance and renewal expenses. Included in these expenses are allocations of costs for departments that support these policy issuance and renewal functions.

Consistent with its legal structure as a reciprocal insurer, the Exchange does not have any employees or officers. Therefore, it enters into contractual relationships by and through the subscribers' attorney-in-fact. Indemnity serves as the attorney-in-fact on behalf of the subscribers at the Exchange with respect to its administrative services as enumerated in the subscriber's agreement. The Exchange's insurance subsidiaries also utilize Indemnity for these services in accordance with the service agreements between each of the subsidiaries and Indemnity. Claims handling services include costs incurred in the claims process, including the adjustment, investigation, defense, recordingrecording, 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, accountingaccounting, and all other functions attributable to the investment of funds. In 2024,2025, approximately 70%71% of the administrative services expenses were entirely attributable to the respective administrative functions (claims handling, life insurance managementmanagement, and investment management), while the remaining 30%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 Consolidated Statements of Operations. The subscriber's agreement and service agreements provide for reimbursement of amounts incurred for these services to Indemnity. Reimbursements are settled at cost on a monthly basis. State insurance regulations require that intercompany service agreements and any material amendments be approved in advance by the state insurance department.

Our results of operations are tied to the growth and financial condition of the Exchange as the Exchange is our sole customer, and our earnings are largely generated from management fees based on the direct and affiliated assumed premiums written by the Exchange. The Exchange generates revenue by insuring preferred and standard risks, with personal lines comprising 71% of the 20242025 direct and affiliated assumed written premiums and commercial lines comprising the remaining 29%. The principal personal lines products are private passenger automobile and homeowners. The principal commercial lines products are commercial multi-peril, commercial automobileautomobile, and workers compensation.

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

Operating income increased in 20242025 compared to 20232024 as growth in operating revenue outpaced the growth inexceeded operating expenses. Operating income is primarily comprised of management fee revenue less the cost of policy issuance and renewal services. Management fee revenue is based upon the management fee rate we charge and the direct and affiliated assumed premiums written by the Exchange. The management fee rate was 25% for 2024, 2023,2025 and 2022.2024. The direct and affiliated assumed premiums written by the Exchange increased 18.4%8.9% to $11.9$13.0 billion in 2024 and 17.0% to $10.1 billion in 2023.2025.

Cost of operations for policy issuance and renewal services increased 15.0%8.7% to $2.3$2.5 billion in 20242025 primarily due to higher scheduled commissions driven by direct and affiliated assumed written premium growth, as well as increased personnel costs and underwriting report costs, partially offset by decreased professional fees. Cost of operations for policy issuance and renewal services increased 12.0% to $2.0 billion in 2023 primarily due to higher scheduled commissions driven by direct and affiliated assumed written premium growth, as well as increased employee compensation and technology costs, partially offset by decreased agent incentive compensation drivendue byto higherimproved claims severityprofitability, and relatedincreased losspersonnel costsand experiencedhardware byand thesoftware Exchange.costs.

Management fee revenue for administrative services increased 7.4%8.3% to $68.4$74.1 million in 2024 compared to an increase of 9.2% in 2023.2025. The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $806.3$836.6 million in 2024 and $737.1 million in 2023,2025, but had no net impact on operating income.

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

Our portfolio of fixed maturityavailable-for-sale and equity security investments is subject to market volatility, especially in periods of instability in the worldwide financial markets. Net investment income is impacted by the general level of interest rates, which impact reinvested cash flow from the portfolio and business operations. Depending upon market conditions, considerable fluctuation could occur in the fair value of our investment portfolio and reported total investment income, which could have an adverse impact on our consolidated financial condition, results of operations, and cash flows. Various ongoing geopolitical events, the uncertain inflationarytariff, environmentinflationary, and interest rate 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.

Accumulated and projected benefit obligations are expressed as the present value of future cash payments. We discount those cash payments based upon a yield curve developed from corporate bond yield information with maturities that correspond to the payment of benefits. Lower discount rates increase present values and subsequent year pension expense, while higher discount rates decrease present values and subsequent year pension expense. The construction of the yield curve is based upon yields of corporate bonds rated AA or equivalent quality. Target yields are developed from bonds at various maturity points and a curve is fitted to those targets. Spot rates (zero coupon bond yields) are developed from the yield curve and used to discount benefit payment amounts associated with each future year. The present value of plan benefits is calculated by applying the spot/discount rates to projected benefit cash flows. A single discount rate is then developed to produce the same present value. The cash flows from the yield curve were matched against our projected benefit payments in the pension plan, which have a duration of about 1415 years. This yield curve supported the selection of a 5.87%5.72% discount rate for the projected benefit obligation at December 31, 20242025 and for the 20252026 pension expense. The same methodology was used to develop the 5.34%5.87% and 5.67%5.34% discount rates used to determine the projected benefit obligation for 20232024 and 2022,2023, respectively, and the pension cost (income) for 20242025 and 2023,2024, respectively. A 25 basis point decrease in the discount rate assumption, with other assumptions held constant, would increase pension cost in the following year by $4.6$4.0 million, of which our share would be approximately $1.8$1.6 million, and would increase the pension benefit obligation by $36.3$40.0 million.

The expected long-term rate of return for the pension plan represents the average rate of return to be earned on plan assets over the period the benefits included in the benefit obligation are to be paid. To determine the expected long-term rate of return assumption, we utilized models based upon rigorous historical analysis and forward-looking views of the financial markets based upon key factors such as historical returns for the asset class' applicable indices, the correlations of the asset classes under various market conditions and consensus views on future real economic growth and inflation. The expected future return for each asset class is then combined by considering correlations between asset classes and the volatilities of each asset class to produce a reasonable range of asset return results within which our expected long-term rate of return assumption falls. The expected long-term rate of return is generally less susceptible to annual revisions as there are typically no significant changes in the asset mix. In 2024, we changed our target asset allocation to reduce investment risk by shifting portfolio assets from equity securities to debt securities. Based on the current asset allocation and a review of the key factors and expectations of future asset performance as well as the current market environment, the expected return on asset assumption will remain at 7.00% for 2025.2026. A change of 25 basis points in the expected long-term rate of return assumption, with other assumptions held constant, would have an estimated $2.9$2.8 million impact on net pension benefit cost in the following year, of which our share would be approximately $1.2$1.1 million.

We use a four-year averaging method to determine the market-related value of plan assets, which is used to determine the expected return component of pension expense. Under this methodology, asset gains or losses that result from returns that differ from our long-term rate of return assumption are recognized in the market-related value of assets on a level basis over a four-year period. The market-related asset experience during 20242025 that related to the actual investment return being different from that assumed during the prior year was a lossgain of $72.8$10.1 million. Recognition of this lossgain will be deferred and recognized over a four-year period, consistent with the market-related asset value methodology. Once factored into the market-related asset value, these experience gains and losses will be amortized over a period of 13 years, which is the remaining service period of the employee group.

We recognized net pension benefit income of $1.5 million in 2024 primarily driven by higher expected return on assets, partially offset by a lower discount rate, compared to 2023. We expect to recognize net pension benefit expense of $7.8$9.6 million in 2025 primarily driven by anticipated plan progression as well as demographic assumption updates from a 2024 experience study, partially offset by ana higher discount rate, compared to 2024. We expect to recognize net pension benefit expense of $18.0 million in 2026. The estimated increase from 2025 is primarily driven by anticipated plan progression and a decrease in the discount rate. Our share of the net pension benefit incomeexpense after reimbursements was $0.6$3.7 million in 2024.2025. We expect our share of the net pension benefit expense to be approximately $3.1$7.0 million in 2025,2026, of which expense of $13.6$14.5 million will be recorded in operating expense and income of $10.5$7.5 million will be recorded in other income.

The management fee is calculated by multiplying all direct and affiliated assumed premiums written by the Exchange by the management fee rate, which is determinedset by our Board of Directors at least annually. The management fee rate was set at 25% for 2024, 20232025 and 2022.2024. 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 20242025 compared to prior years,2024, which did not have a material impact on our consolidated financial statements.

Direct and affiliated assumed premiums include premiums written directly by the Exchange and premiums assumed from its wholly owned property and casualty subsidiaries. Direct and affiliated assumed premiums written by the Exchange increased 18.4%8.9% to $13.0 billion in 2025, from $11.9 billion in 2024, from $10.1 billion in 2023, primarily driven by increased personal lines and commercial multi-peril premiums written. Year-over-year policies in force for all lines of business increased 4.8% in 2024 as a result of continued strong policyholder retention, compared to 6.9% in 2023. The year-over-year average premium per policy for all lines of business increased 9.6% at December 31, 2025 compared to 13.4% at December 31, 20242024. comparedYear-over-year topolicies 9.4%in atforce Decemberfor 31,all 2023.lines of business decreased 1.1% in 2025 as a result of a decrease in new business policies written.

Premiums generated from renewalnew business increaseddecreased 19.1%17.8% to $10.2$1.5 billion in 2024,2025. and increased 13.9%Contributing to $8.5this billion,change was a 22.8% decrease in 2023. Underlying the trend in renewalnew business premiumspolicies inwritten, bothpartially periodsoffset wereby increasesa 6.5% increase in year-over-year average premium per policy ofon 12.9%new business at December 31, 2024 and 9.0% at December 31, 2023, as well as an increase in year-over-year policies in force of 6.0% and 4.5% in 2024 and 2023, respectively.2025.

PersonalPremiums linesgenerated –from Totalrenewal personal lines premiums writtenbusiness increased 20.0%13.4% to $8.5$11.5 billion in 2024,2025, resulting from $7.1 billion in 2023, driven by a 15.1%an increase in total personal lines year-over-year average premium per policy andof a 4.8% increase in total personal lines policies in force. Total personal lines year-over-year average premium per policy increased 10.5%10.3% at December 31, 20232025, andas well as an increase in year-over-year policies in force increasedof 7.4%2.4% in 2023.2025.

CommercialPersonal lines – Total commercialpersonal lines premiums written increased 14.5%8.3% to $3.4$9.2 billion in 2025, from $8.5 billion in 2024, from $3.0 billion in 2023, driven by a 9.4% increase in the total commercialpersonal lines year-over-year average premium per policypolicy, andpartially offset by a 4.6%1.5% increasedecrease in total commercialpersonal lines policies in force. Total commercial lines premiums written increased 13.0% in 2023, compared to 2022, driven by a 9.5% increase in the total commercial lines year-over-year average premium per policy and a 3.2% increase in total commercial lines policies in force.

Changes in premium levels attributable to the growth in policies in force directly affect the profitability of the Exchange and have a direct bearing on our management fee.fee revenue. Our continued focus on underwriting discipline and the maturing of pricing sophistication models havesupport contributedrisk toselection theand Exchange'slong-term steadyrate adequacy. In 2025, policy retention ratios.declined slightly compared to prior periods, primarily reflecting competitive market conditions. The continued growth of itsthe Exchange's policy base is dependent upon the Exchange'sits ability to retain existing and attract new subscribers (policyholders). A lack of new policy growth or the inability to retain existing customers could have an adverse effect on the Exchange's premium level growth, and consequently our management fee.fee revenue.

Changes in premium levels attributable to rate changes also directly affect the profitability of the Exchange and have a direct bearing on our management fee.fee revenue. Pricing actions contemplated or taken by the Exchange are subject to various regulatory requirements of the states in which it operates. Future premiums could be impacted by potential changes in regulation, inflationary trends, and tariff policies, among others. The pricing actions already implemented, or to be implemented, have an effect on the market competitiveness of the Exchange's insurance products. Such pricing actions, and those of the Exchange's competitors, could affect the ability of the Exchange's agents to retain and attract new business. We expect the Exchange's pricing actions in 20242025 to result in an increase in direct written premiums in 20252026; however, exposure reductions and/or changes in mix of business as a result of economic conditions could impact the average direct and affiliated assumed premium written by the Exchange, as customers may reduce coverages. See also Part I, Item 1A. "Risk Factors".

The management fee revenue allocated for providing policy issuance and renewal services was 24.37% and 24.40% of the direct and affiliated assumed premiums written by the Exchange in 20242025 and 24.30%2024, in both 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.

Commissions – Commissions increased $252.9$175.6 million in 20242025 compared to 2023,2024, primarily driven by the growth in direct and affiliated assumed written premium. Commissions increased $169.0 million in 2023 compared to 2022, primarily driven by the growth in directpremium and affiliatedan assumed written premium, partially offset by a decreaseincrease in agent incentive compensation. The profitability component of agent incentive compensation decreased due to higherimproved claims severityproperty and relatedcasualty lossunderwriting costsprofitability infor the three-year period ended 20232025 compared to the three-year period ended 2022.2024.

Non-commission expense – Non-commission expense increased $47.9$25.5 million in 20242025 compared to 2023.2024. Underwriting and policy processing expense increased $18.5$4.8 million primarily due to increased underwriting report and personnel costs. Information technology costs decreased $1.3 million primarily due to a decrease in professional feespostage and personnel costs, partially offset by a decrease in underwriting report costs. Information technology costs increased $24.3 million primarily due to an increase in personnel costs and hardware and software costs. SalesCustomer andservice advertising expensecosts increased $7.6$3.5 million primarily due to increased agent-relatedcredit card processing fees and personnel costs. Administrative and other costs anddecreased costs from community development initiatives. Customer service costs increased $8.7$7.1 million primarily due to increaseddecreased professional fees and personnel costs and credit card processing fees. Administrative and other costs increased $14.5 million primarily due to increased personnel costs, charitable contributions and professional fees. Personnel costs in 2024 were impacted by increased compensation.costs.

The management fee revenue allocated to administrative services was 0.63% and 0.60% of the direct and affiliated assumed premiums written by the Exchange in 20242025 and 0.70%2024, in both 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 Consolidated Statements of Operations.

Net investment income includes interest and dividends on our fixed maturity and equity security portfolios and the results of our limited partnership investments, net of investment expenses. Net investment income increased $25.6$15.7 million in 2024,2025, compared to 2023, primarily due to improved results of limited partnership investments and an increase in bond and cash and cash equivalent income as a result of higher bond yields and average holdings. Net investment income increased $16.0 million in 2023, compared to 2022,2024, primarily due to an increase in bond and cash and cash equivalent income as a result of higher yieldsaverage holdings and increasedbond rates. Net investment income includes limited partnership earnings of $2.0 million in 2024 compared to limited partnership losses of $11.3 million and $10.4 million in 2023 and 2022, respectively.yields.

Net impairment losses of $3.3 million in 2025 primarily included both credit-related and intent to sell impairments on available-for-sale securities and current expected credit losses on other loans receivable. Impairment losses of $4.1 million in 2024 primarily includeincluded current expected credit losses on held-to-maturity securities and other loans receivable. Impairment losses of $9.8 million in 2023 primarily include current expected credit losses on other loans receivable and intent to sell impairments on available-for-sale securities. Net impairment losses of $0.7 million in 2022 include both credit-related and intent to sell impairments on available-for-sale securities.. See "Other assets" in Item 8. "Financial Statements and Supplementary Data - Note 2, Significant Accounting Policies, of Notes to Consolidated Financial Statements" for additional information on other loans receivable and held-to-maturity securities.

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.AM Best through assessing its financial stability and ability to pay claims. The ratings are generally based upon factors relevant to policyholders and are not directed toward return to investors. TheOn September 5, 2025, the Exchange and each of its property and casualty insurance subsidiaries arewere rateddowngraded from A+ "Superior", to A "Excellent" and its financial strength rating was revised from negative to stable. The A "Excellent" rating is the secondthird highest financial strength rating, which israting assigned to companies that have achieved superiorexcellent overall performance when compared to the standards established by A.M.AM Best and have aan superiorexcellent ability to meet obligations to policyholders over the long term. AsWhile ofthe DecemberExchange's 31,policyholder 2024,surplus onlycontinues approximatelyto 13%be of insurance groups,classified in whichAM Best's strongest category, the Exchange is included, are rated A+ or higher. On August 8, 2024, while our A+ "Superior" rating was reaffirmed, the financial strength rating outlook was revised from stable to negative. The outlookdowngrade was primarily driven by the Exchange’sExchange's large underwriting losses in recent profitabilityyears, challengesdriven fromby risingelevated lossweather-related cost pressuresevents and increased weather-relatedseverity activity,in the auto and thehomeowners' related surplus impact.segments. The outlookstable acknowledgedfinancial strength rating reflects the expectation that whilethe actionsExchange's haveprofitability beeninitiatives implementedwill toaccelerate addressand stabilize operating results over the challenges,near term. Furthermore, the timingstable lagoutlook related toreflects the moststrongest significantlevel action,of ratebalance increases,sheet could result in interim challenges until such timestrength as theassessed rateby increasesAM are earned and the full beneficial impact is realized.Best.

The financial statements of the Exchange are prepared in accordance with statutory accounting principles prescribed by the Commonwealth of Pennsylvania. Financial statements prepared under statutory accounting principles focus on the solvency of the insurer and generally provide a more conservative approach than under U.S. generally accepted accounting principles. Statutory direct written premiums of the Exchange and its wholly owned property and casualty insurance subsidiaries grew 18.4%8.9% to $13.0 billion in 2025 from $11.9 billion in 2024 from $10.1 billion in 2023.2024. These premiums, along with investment income, are the major sources of cash that support the operations of the Exchange. Policyholders' surplus, determined under statutory accounting principles, was $10.1 billion and $9.3 billion at both December 31, 20242025 and December2024, 31, 2023.respectively. The Exchange and its wholly owned property and casualty insurance subsidiaries' year-over-year policy retention ratio continues to be high at 88.4% at December 31, 2025 and 90.4% at December 31, 2024 and 91.2% at December 31, 2023.2024.

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

(1)This includes $44.4 million and $7.3 million of securities lent under a securities lending agreement.agreement as of December 31, 2025 and 2024, respectively.

Available-for-sale securities are carried at fair value with unrealized gains and losses, net of deferred taxes, included in shareholders' equity. Net unrealized lossesgains on available-for-sale securities, net of deferred taxes, totaled $1.3 million at December 31, 2025, compared to unrealized losses of $17.6 million at December 31, 2024, compared to $24.7 million at December 31, 2023.2024. Our evaluation of deferred tax assets and the need for a valuation allowance included available tax planning strategies that could be implemented, if necessary, to support the realizability of deferred tax assets. We believe those tax strategies are feasible and prudent.

The funded status of our postretirement benefit plans is recognized in the Consolidated Statements of Financial Position, with a corresponding adjustment to accumulated other comprehensive income (loss), net of tax. At December 31, 2024,2025, shareholders' equity amounts related to these postretirement plans decreased by $41.3$23.3 million, net of tax, of which $5.2$1.1 million primarily represents amortization of net actuarial gain and $36.1$22.2 million primarily represents the current period actuarial loss. The 20242025 actuarial loss was driven primarily by the lower than expected return on plan assets, partially offset by the higher discount rate used to measure the future benefit obligations. At December 31, 2023, shareholders' equity amounts related to these postretirement plans decreased by $33.8 million, net of tax, of which $11.0 million represents amortization of the prior service cost and net actuarial gain and $22.8 million primarily represents the current period actuarial loss. The 2023 actuarial loss was driven by the lower discount rate used to measure the future benefit obligations, partially offset by higher than expected return on plan assets. Although we are the sponsor of these postretirement plans and record the funded status of these plans, there are reimbursements between us and the Exchange and its insurance subsidiaries for their allocated share of pension income or cost. See Item 8. "Financial Statements and Supplementary Data - Note 10, Postretirement Benefits, of Notes to Consolidated Financial Statements" contained within this report for additional details on these reimbursements.

We continue to monitor the sufficiency of our liquidity and capital resources given the potential impact of current economic conditions, including the uncertain inflationarytariff, inflationary, and interest rate environment. While we did not see a significant impact on our sources or uses of cash in 2024,2025, future market disruptions could occur which may affect our liquidity position. If our normal operating and investing cash activities were to become insufficient to meet future funding requirements, we believe we have sufficient access to liquidity through our cash position, diverse liquid marketable securities, and our $100 million bank revolving line of credit that does not expire until November 1, 2029. See broader discussions of potential risks to our operations in Operating Overview and Part I, Item 1A. "Risk Factors" contained within this report.

•Home office renovations – We have agreements with external contracting firms for renovations to an office buildingbuildings that isare part of our principal headquarters. Remaining commitments related to the underlying contracts total $45.4$77.5 million at December 31, 2024,2025, of which overthe halfmajority is due in the next 12 months. Additional contracts will be executed as we begin each new phase of the overall renovation projectprojects and will be funded using our working capital. See Item 8. "Financial Statements and Supplementary Data - Note 8, Fixed Assets, of Notes to Consolidated Financial Statements" for additional details on construction in progress costs and expected completion date.

•Other commitments – We have commitments for approximately $460$473 million which include agreements for various services, including information technology, support and maintenance obligations, operating leases for equipment, vehiclesvehicles, and real estate, and other obligations in the ordinary course of business. We expect to make future cash payments according to the contract terms. These agreements are enforceable and legally binding and specify fixed amounts or minimum quantities to be purchased. Some agreements may contain cancellation provisions, some of which may require us to pay a termination fee. OverApproximately halftwo-thirds of these commitments are due in the next 12 months. We are reimbursed from the Exchange and its insurance subsidiaries for the portion of these costs related to administrative services.

Net cash provided by operating activities was $686.7 million in 2025, compared to $611.2 million in 2024, compared to $381.2 million in 2023 and $366.2 million in 2022.2024. Increased cash provided by operating activities in 2024,2025, compared to 2023,2024, was primarily due to an increase in management fees received of $478.2$311.1 million driven by growth in direct and affiliated assumed premiums written by the Exchange, a decrease in pension and employee benefits paid of $59.0 million due to lower pension contributions,Exchange and a decrease in incentiveincome compensationtaxes paid to agents of $25.3 million. Pension contributions totaled $33.0$55.9 million indriven 2024by lower taxable income compared to $95.02024, millionresulting from changes in 2023.tax legislation and increased charitable contributions. This was partially offset by increases in cash paid for agent commissions of $243.3 million driven by premium growth and income taxes paid of $55.5 million. Increased cash provided by operating activities in 2023, compared to 2022, was primarily due to an increase in management fees received of $319.2 million driven by growth in direct and affiliated assumed premiums written by the Exchange. This was partially offset by increases in cash paid for agent commissions of $157.9$165.3 million driven by premium growth, pension and employeethe benefitscharitable paidcontribution to the Erie Insurance Foundation of $101.3$100 million primarily due to higher pension contributions, and general operating expenses paid of $30.3 million primarily driven by higher information technology-related professional fees and hardware and software costs.million.

Net cash used in financing activities was $199.9 million in 2025, compared to $230.0 million in 2024,2024. comparedDecreased tocash $221.7 millionused in 2023financing andactivities $300.8 million in 2022was primarily due to increased cash collateral received related to increased lending of securities under our securities lending program. This was partially offset by increased dividends paid to shareholders. While weWe increased both our Class A and Class B shareholder regular quarterly dividends by 7.1% infor 2024 and 7.2% in 2023, the change in net cash used related to financing activities in 20232025, compared to 2022 was primarily due to the repayment of the remaining $93.2 million balance on the term loan in 2022.2024.

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

Outside of our normal operating and investing cash activities, future funding requirements could be met through: 1) unrestricted and unpledged cash and cash equivalents, which totaled approximately $271.0$315.0 million at December 31, 2024,2025, 2) $100 million available bank revolving line of credit, and 3) liquidation of unrestricted and unpledged assets held in our investment portfolio, including equity securities and investment grade bonds, which totaled approximately $849.8$1.1 millionbillion at December 31, 2024.2025. Volatility in the financial markets could impair our ability to sell certain fixed income securities or cause such securities to sell at deep discounts. Additionally, we have the ability to curtail or modify discretionary cash outlays such as those related to shareholder dividends and share repurchase activities. See Item 8. "Financial Statements and Supplementary Data - Note 9, Bank Line of Credit, of Notes to Consolidated Financial Statements" for additional information related to our bank revolving line of credit.

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

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 assumptionsassumptions, or otherwise.

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

In 2025, we experienced an information security incident that has been remediated and did not have a material impact on our consolidated financial condition, results of operations, or cash flows. As of MarchJune 31,30, 2026, we continue to pursue recovery of a portion of lost income due to business interruption and related expenses from our cybersecurity insurance policy.

Operating income increased in both the firstsecond quarter ofand six months ended June 30, 2026, compared to the same periodperiods in 2025, as growth in operating revenue outpaced the growth in operating expenses.2025. Management fee revenue for policy issuance and renewal services increased 4.2%4.7% to $786.4$862.9 million in the firstsecond quarter of 2026.2026 and 4.5% to $1.6 billion for the six months ended June 30, 2026, compared to the same periods in 2025. 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 2026 and 2025. The direct and affiliated assumed premiums written by the Exchange increased 3.6%3.3% to $3.2$3.5 billion in the firstsecond quarter of 2026 and 3.4% to $6.8 billion for the six months ended June 30, 2026, compared to the same periodperiods in 2025.

Cost of operations for policy issuance and renewal services increased 2.8%5.5% to $645.0$684.1 million in the firstsecond quarter of 2026 and 4.2% to $1.3 billion for the six months ended June 30, 2026, compared to the same periodperiods in 2025, primarily due to increased agent incentive compensation due to improved profitability and higher scheduled commissions driven by direct and affiliated assumed written premium growth, partially offset by lower professional fees and decreased survey and underwriting report costs.

Management fee revenue for administrative services increased 10.4%7.2% to $19.5$19.6 million in the firstsecond quarter of 2026 and 8.8% to $39.1 million for the six months ended June 30, 2026, compared to the same periodperiods in 2025. The administrative services reimbursement revenue and corresponding cost of operations increased both total operating revenue and total operating expenses by $200.1$201.6 million in the firstsecond quarter of 2026 and $401.7 million for the six months ended June 30, 2026, but had no net impact on operating income.

Total investment income increased $2.6$3.0 million in the firstsecond quarter of 2026 and $5.5 million for the six months ended June 30, 2026, compared to the same periodperiods in 2025,2025. The results from both periods were primarily due to an increase in net investment income,income. The increase for the six months ended June 30, 2026 was partially offset by an increase innet realized and unrealized investment losses.losses compared to net gains in 2025.

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

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. ManagementSee feesPart areI, returnedItem 1. "Financial Statements - Note 3, Revenue, of Notes to theConsolidated ExchangeFinancial whenStatements" policiescontained arewithin cancelledthis mid-term and unearned premiums are refunded.report.

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 3.6%3.3% to $3.2$3.5 billion in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025, primarily driven by increased homeowners, commercial multi-perillines and commercialhomeowners premiums written, partially offset by decreased personal auto premiums written. The year-over-year average premium per policy for all lines of business increased 8.1%6.8% at MarchJune 31,30, 2026 compared to 13.2%11.9% at MarchJune 31,30, 2025. Year-over-year policies in force for all lines of business decreased 1.7%2.0% in the firstsecond quarter of 2026 compared to an increase 3.2%1.7% in the firstsecond quarter of 2025.

Premiums generated from new business decreasedincreased 9.5%9.8% to $345$395 million in the firstsecond quarter of 2026 compared to the same period in 2025, primarily driven by decreasedincreased premiums written in the commercialpersonal multi-perilauto and personal autohomeowners lines. Contributing to this change was a 10.4%13.9% decreaseincrease in new business policies written,written partially offset byand a 4.5%3.9% increase in year-over-year average premium per policy on new business at MarchJune 31,30, 2026. The increase in new business was impacted by the 2025 information security incident, which disrupted operations including new business production from June 7, 2025 through June 30, 2025, affecting the year-over-year comparison.

Premiums generated from renewal business increased 5.4%2.5% to $2.9$3.1 billion in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025 resulting from an increase of 8.7%7.2% in year-over-year average premium per policy at MarchJune 31,30, 2026, aspartially welloffset asby ana increasedecrease in year-over-year policies in force of 1.0%0.9% in the firstsecond quarter of 2026.

Personal lines – Total personal lines premiums written increased 2.1%1.2% to $2.2$2.5 billion in the firstsecond quarter of 2026, compared to the firstsecond quarter of 2025, driven by a 7.7%6.0% increase in total personal lines year-over-year average premium per policy, partially offset by a 2.2%2.5% decrease in total personal lines policies in force.

Commercial lines – Total commercial lines premiums written increased 6.8%8.3% to $1.0 billion in the firstsecond quarter of 2026, compared to the firstsecond quarter of 2025, driven by a 6.4%5.9% increase in total commercial lines year-over-year average premium per policy and a 2.1% increase in total commercial lines policies in force.

The management fee revenue allocated for providing policy issuance and renewal services was 24.41% and 24.37% of the direct and affiliated assumed premiums written by the Exchange for the three and six month periods ended MarchJune 31,30, 2026 and 2025,24.37% respectively.for the same periods in 2025. 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.

(1) 2025 amounts have been recast to conform to the current period presentation. See Part I, Item 1. "Financial Statements - Note 4, Segment Information, of Notes to Consolidated Financial Statements" contained within this report for additional information on the revised expense categories.

Commissions – Commissions increased $28.0$44.7 million in the firstsecond quarter of 2026 and $72.7 million for the six months ended June 30, 2026, compared to the same periodperiods in 2025, primarily driven by an increase in agent incentive compensation. The estimated agent incentive payouts at MarchJune 31,30, 2026 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 2026. The profitability component of agent incentive compensation increased due to improved actual and forecasted loss ratios for the three-year period ended 2026 compared to the three-year period ended 2025. Commission expense is also impacted by the growth in direct and affiliated assumed written premium.

Non-commission expense – Non-commission expense decreased $10.7$8.8 million in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025. Personnel costs increased $2.1$3.0 million, primarily due to increased incentive compensation driven by higherstronger pensionperformance costsmetrics and increaseda compensation.smaller decrease in company stock price. This increase was partially offset by bonuses awarded to all employees in 2025 in recognition of our 100th anniversary. Sales and advertising decreased $2.0$1.7 million primarily due to a decrease in advertising costsagent-related and community development initiativeadvertising costs. Acquisition and underwriting support costs decreased $1.9$3.9 million primarily due to lower underwriting report and postage costs. Professional fees decreased $7.0$5.0 million primarily due to reduced use of third-party services related to technology initiatives. Administrative and other costs decreased $1.6$2.1 million primarily due to lower credit card processing fees and charitable contributions related to the transition of charitable giving through the Erie Insurance Foundation, partially offset by an increase in credit card processing fees.Foundation.

The management fee revenue allocated to administrative services was 0.59% and 0.63% of the direct and affiliated assumed premiums written by the Exchange for the three and six month periods ended MarchJune 31,30, 2026 and 2025,0.63% respectively.for the same periods in 2025. This portion of the management fee is recognized as revenue over a four-year period representing the time over which the services are provided. We also report reimbursed costs as revenues, which are recognized monthly as services are provided. The administrative services expenses we incur and the related reimbursements we receive are recorded gross in the Consolidated Statements of Operations.

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

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 $3.6$2.6 million in the firstsecond quarter of 2026 and $6.2 million for the six months ended June 30, 2026 compared to the same periodperiods in 2025,2025. The increase in both periods was primarily due to an increase in bond income driven by higher average holdings and yields.holdings.

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

The financial statements of the Exchange are prepared in accordance with statutory accounting principles prescribed by the Commonwealth of Pennsylvania. Financial statements prepared under statutory accounting principles focus on the solvency of the insurer and generally provide a more conservative approach than under U.S. generally accepted accounting principles. Statutory direct written premiums of the Exchange and its wholly owned property and casualty insurance subsidiaries grew 3.6%3.4% to $3.2$6.8 billion in the first threesix months of 2026 compared to the same period in 2025. 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 $10.7 billion and $10.1 billion at bothJune March 31,30, 2026 and December 31, 2025.2025, respectively. The Exchange and its wholly owned property and casualty insurance subsidiaries' year-over-year policy retention ratio continueswas to be high87.5% at 88.0%June at March 31,30, 2026 and 88.4% at December 31, 2025.

(1)This includes $37.0 million and $44.4 million of securities lent under a securities lending agreement as of MarchJune 31,30, 2026 and December 31, 2025, respectively.2025.

(2)This includes $18.3$25.5 million and $20.1 million of securities lent under a securities lending agreement as of MarchJune 31,30, 2026 and December 31, 2025, respectively..respectively.

Available-for-sale securities are carried at fair value with unrealized gains and losses, net of deferred taxes, included in shareholders’ equity. Net unrealized losses on available-for-sale securities, net of deferred taxes, totaled $11.3$10.3 million at MarchJune 31,30, 2026, compared to unrealized gains of $1.3 million at December 31, 2025.

Equity securities primarily include nonredeemablenon-redeemable preferred stocks and exchange-traded funds. These securities are carried at fair value in the Consolidated Statements of Financial Position with all changes in unrealized gains and losses reflected in the Consolidated Statements of Operations.

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

We continue to monitor the sufficiency of our liquidity and capital resources given the potential impact of current economic conditions, including the uncertain tariff, inflationary, and interest rate environment. While we did not see a significant impact on our sources or uses of cash in the firstsecond quarter of 2026, future market disruptions could occur which may affect our liquidity position. If our normal operating and investing cash activities were to become insufficient to meet future funding requirements, we believe we have sufficient access to liquidity through our cash position, diverse liquid marketable securities, and our $100 million bank revolving line of credit that does not expire until November 2029. See broader discussions of potential risks to our operations in "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, 2025 as filed with the Securities and Exchange Commission on February 23, 2026.

Liquidity is a measure of a company’s ability to generate sufficient cash flows to meet the short- and long-term cash requirements of its business operations and growth needs. Our liquidity requirements have been met primarily by funds generated from management fee revenue and income from investments. Cash provided from these sources is used primarily to fund the costs of our management operations including commissions, salaries and wages, pension plans, share repurchases, dividends to shareholders, the purchase and development of information technology, and other capital expenditures. See Part I, Item 1. "Financial Statements - Note 9, Postretirement Benefits, of Notes to Consolidated Financial Statements" contained within this report for the funding policy and related contributioncontributions for our defined benefit pension plan. We expect that our operating cash needs will be met by funds generated from operations. Cash in excess of our operating needs is primarily invested in investment grade fixed maturities. As part of our liquidity review, we regularly evaluate our capital needs based on current and projected results and consider the potential impacts to our liquidity, borrowing capacity, financial covenants, and capital availability.

The following table provides condensed cash flow information as follows for the threesix months ended MarchJune 3130:

Net cash provided by operating activities was $91.9$306.8 million in the first threesix months of 2026, compared to $118.1$295.7 million for the same period in 2025. DecreasedIncreased cash fromprovided by operating activities was primarily due to an increase in incentivemanagement compensationfees paid to agentsreceived of $55.2 million from improved underwriting profitability and cash paid for agent commissions of $19.4$181.8 million driven by growth in direct and affiliated assumed premiums written by the Exchange.Exchange, and a decrease in administrative services expenses paid of $19.0 million. This was partially offset by ana increasedecrease in managementadministrative feesservices reimbursements received of $89.4 million and increases in incentive compensation paid to agents of $52.5 million from improved underwriting profitability and cash paid for agent commissions of $42.3 million driven by premium growth. Additionally, we plan to make an additional discretionary contribution of $30 million during the third quarter of 2026, which will further improve the plan's funded status.

Net cash used in investing activities was $88.7$234.7 million in the first threesix months of 2026, compared to $97.8$136.6 million for the same period in 2025. The decreaseincrease in cash used in investing activities was primarily duedriven toby an increase in proceeds, netpurchases of purchases, from sales and maturities/callsinvestments of available-for-sale$402.3 securitiesmillion of $21.9 million, partially offset byand an increase in fixed asset purchases of $7.7$29.0 million mostly related to software and home office renovations. This increase was partially offset by an increase in proceeds from investments of $335.8 million.

Net cash used in financing activities was $80.4$135.1 million in the first threesix months of 2026, compared to $58.4$99.5 million for the same period in 2025. Increased cash used in financing activities was primarily due to the release ofreduced cash collateral received during the first six months of 2026 compared to same period in 2025 resulting from lower securities lending activity under our securities lending program.

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 $228.5$242.5 million at MarchJune 31,30, 2026, 2) $100 million available bank revolving line of credit, and 3) liquidation of unrestricted and unpledged assets held in our investment portfolio, including equity securities and investment grade bonds, which totaled approximately $1.1$1.3 billion at MarchJune 31,30, 2026. Volatility in the financial markets could impair our ability to sell certain fixed income securities or cause such securities to sell at deep discounts. Additionally, we have the ability to curtail or modify discretionary cash outlays such as those related to shareholder dividends and share repurchase activities. See Part I, Item 1. "Financial Statements - Note 8, Bank Line of Credit, of Notes to Consolidated Financial Statements" contained within this report for additional information related to our bank revolving line of credit.