Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

			Page Number
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)			39
Consolidated Statements of Operations for the Years Ended December 31, 2024, 2023 and 2022			41
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2024, 2023 and 2022			42
Consolidated Statements of Financial Position - December 31, 2024 and 2023			43
Consolidated Statements of Shareholders' Equity for the Years ended December 31, 2024, 2023 and 2022			44
Consolidated Statements of Cash Flows for the Years ended December 31, 2024, 2023 and 2022			45
Notes to Consolidated Financial Statements - December 31, 2024			46

Report of Independent Registered Public Accounting Firm

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

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial position of Erie Indemnity Company (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 27, 2025 expressed an unqualified opinion thereon.

Basis for Opinion

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

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

Critical Audit Matter

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

						Cost of Operations - administrative services
Description of the Matter						For the year ended December 31, 2024, the Company’s cost of operations – administrative services totaled $806.3 million. As explained in Note 2 of the consolidated financial statements, the Company serves as the attorney-in-fact on behalf of the subscribers at the Erie Insurance Exchange (Exchange) with respect to its administrative services as enumerated in the subscriber’s agreement. The Exchange’s insurance subsidiaries also utilize the Company for these services in accordance with the service agreements between the subsidiaries and the Company. Certain administrative services costs, which include costs associated with claims handling services, life insurance management services, investment management, and operating overhead incurred by the Company on behalf of the Exchange and its insurance subsidiaries, are reimbursed to the Company at cost and recorded as administrative services reimbursement revenue, based on the nature of the cost or relevant utilization statistic. Auditing management’s cost of operations – administrative services was complex due to the multiple costs that are allocated for reimbursement, the extensiveness of the allocation process, and the degree of auditor judgement needed to design the nature and extent of audit procedures required to address the matter.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s cost of operations – administrative services process. This included, among others, testing controls over the determination of the utilization statistics and ultimate allocation of costs to the Exchange and its insurance subsidiaries. To test the Company’s cost of operations – administrative services, our procedures included, among others, evaluating that the costs included in the allocations are in accordance with the subscriber’s agreement and the service agreements with the Exchange and its insurance subsidiaries. We tested the completeness of the costs subjected to allocation by agreeing the costs recorded in the general ledger to the cost allocation calculation. We performed a test of details over a sample of cost allocations for accuracy.

/s/ Ernst & Young LLP

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

Indianapolis, Indiana

February 27, 2025

ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

Years ended December 31, 2024, 2023 and 2022

(dollars in thousands, except per share data)

						2024						2023						2022
Operating revenue
Management fee revenue - policy issuance and renewal services						$	2,894,074					$	2,442,073					$	2,087,846
Management fee revenue - administrative services						68,355						63,669						58,323
Administrative services reimbursement revenue						806,336						737,139						668,268
Service agreement revenue						26,350						26,059						25,687
Total operating revenue						3,795,115						3,268,940						2,840,124
Operating expenses
Cost of operations - policy issuance and renewal services						2,312,324						2,011,545						1,795,642
Cost of operations - administrative services						806,336						737,139						668,268
Total operating expenses						3,118,660						2,748,684						2,463,910
Operating income						676,455						520,256						376,214
Investment income
Net investment income						70,155						44,572						28,585
Net realized and unrealized investment gains (losses)						3,229						(5,838)						(27,286)
Net impairment losses recognized in earnings						(4,124)						(9,766)						(667)
Total investment income						69,260						28,968						632
Interest expense, net						—						—						2,009
Other income						11,564						12,712						1,615
Income before income taxes						757,279						561,936						376,452
Income tax expense						156,965						115,875						77,883
Net income						$	600,314					$	446,061					$	298,569
Earnings Per Share
Net income per share
Class A common stock – basic						$	12.89					$	9.58					$	6.41
Class A common stock – diluted						$	11.48					$	8.53					$	5.71
Class B common stock – basic						$	1,934					$	1,437					$	962
Class B common stock – diluted						$	1,933					$	1,437					$	962
Weighted average shares outstanding – Basic
Class A common stock						46,189,044						46,188,981						46,188,916
Class B common stock						2,542						2,542						2,542
Weighted average shares outstanding – Diluted
Class A common stock						52,306,266						52,299,411						52,297,990
Class B common stock						2,542						2,542						2,542

See accompanying notes to Consolidated Financial Statements. See Note 14, "Accumulated Other Comprehensive Income (Loss)", for amounts reclassified out of accumulated other comprehensive income (loss) into the Consolidated Statements of Operations.

ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years ended December 31, 2024, 2023 and 2022

(in thousands)

						2024						2023						2022
Net income						$	600,314					$	446,061					$	298,569
Other comprehensive (loss) income, net of tax
Change in unrealized holding gains (losses) on available-for-sale securities						7,079						27,784						(58,692)
Pension and other postretirement plans						(41,270)						(33,770)						76,566
Total other comprehensive (loss) income, net of tax						(34,191)						(5,986)						17,874
Comprehensive income						$	566,123					$	440,075					$	316,443

See accompanying notes to Consolidated Financial Statements. See Note 14, "Accumulated Other Comprehensive Income (Loss)", for amounts reclassified out of accumulated other comprehensive income (loss) into the Consolidated Statements of Operations.

ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

At December 31, 2024 and 2023

(dollars in thousands, except per share data)

						2024						2023
Assets
Current assets:
Cash and cash equivalents (includes restricted cash of $23,559 and $12,542, respectively)						$	298,397					$	144,055
Available-for-sale securities						44,604						82,017
Receivables from Erie Insurance Exchange and affiliates, net						707,060						625,338
Prepaid expenses and other current assets, net						83,902						69,321
Accrued investment income						11,069						9,458
Total current assets						1,145,032						930,189
Available-for-sale securities, net						991,726						879,224
Available-for-sale securities lent						7,285						—
Equity securities						85,891						84,253
Fixed assets, net						513,494						442,610
Agent loans, net						80,597						58,434
Defined benefit pension plan						21,311						34,320
Other assets, net						43,278						42,934
Total assets						$	2,888,614					$	2,471,964
Liabilities and shareholders' equity
Current liabilities:
Commissions payable						$	408,309					$	353,709
Agent incentive compensation						75,458						68,077
Accounts payable and accrued liabilities						190,028						175,622
Dividends payable						63,569						59,377
Contract liability						42,761						41,210
Deferred executive compensation						14,874						10,982
Securities lending payable						7,513						—
Total current liabilities						802,512						708,977
Defined benefit pension plan						28,070						26,260
Contract liability						21,170						19,910
Deferred executive compensation						19,721						20,936
Deferred income taxes, net						6,418						11,481
Other long-term liabilities						23,465						21,565
Total liabilities						901,356						809,129
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						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						178						178
Additional paid-in-capital						16,466						16,466
Accumulated other comprehensive loss						(47,591)						(13,400)
Retained earnings						3,162,303						2,803,689
Total contributed capital and retained earnings						3,133,348						2,808,925
Treasury stock, at cost; 22,110,132 shares held						(1,169,074)						(1,169,165)
Deferred compensation						22,984						23,075
Total shareholders' equity						1,987,258						1,662,835
Total liabilities and shareholders' equity						$	2,888,614					$	2,471,964

See accompanying notes to Consolidated Financial Statements.

ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Years ended December 31, 2024, 2023 and 2022

(dollars in thousands, except per share data)

			Class A common stock			Class B common stock			Additional paid-in-capital			Accumulated other comprehensive (loss) income			Retained earnings			Treasury stock			Deferred compensation			Total shareholders' equity
Balance, December 31, 2021			$	1,992		$	178		$	16,496		$	(25,288)		$	2,495,190		$	(1,167,828)		$	21,738		$	1,342,478
Net income															298,569									298,569
Other comprehensive income												17,874												17,874
Dividends declared:
Class A $4.52 per share															(208,775)									(208,775)
Class B $678.00 per share															(1,723)									(1,723)
Net purchase of treasury stock (1)									(15)									0						(15)
Deferred compensation																		(2,975)			2,975			0
Rabbi trust distribution (2)																		1,854			(1,854)			0
Balance, December 31, 2022			$	1,992		$	178		$	16,481		$	(7,414)		$	2,583,261		$	(1,168,949)		$	22,859		$	1,448,408
Net income															446,061									446,061
Other comprehensive loss												(5,986)												(5,986)
Dividends declared:
Class A $4.845 per share															(223,786)									(223,786)
Class B $726.75 per share															(1,847)									(1,847)
Net purchase of treasury stock (1)									(15)									0						(15)
Deferred compensation																		(2,228)			2,228			0
Rabbi trust distribution (2)																		2,012			(2,012)			0
Balance, December 31, 2023			$	1,992		$	178		$	16,466		$	(13,400)		$	2,803,689		$	(1,169,165)		$	23,075		$	1,662,835
Net income															600,314									600,314
Other comprehensive loss												(34,191)												(34,191)
Dividends declared:
Class A $5.19 per share															(239,721)									(239,721)
Class B $778.50 per share															(1,979)									(1,979)
Net purchase of treasury stock (1)									0									0						0
Deferred compensation																		(2,156)			2,156			0
Rabbi trust distribution (2)																		2,247			(2,247)			0
Balance, December 31, 2024			$	1,992		$	178		$	16,466		$	(47,591)		$	3,162,303		$	(1,169,074)		$	22,984		$	1,987,258

(1) Net purchases of treasury stock in 2022, 2023 and 2024 include the repurchase of our Class A common stock in the open market that were subsequently distributed to satisfy stock-based compensation awards. See Note 11, "Incentive and Deferred Compensation Plans".

(2) Distributions of our Class A shares were made from the rabbi trust to four incentive compensation deferral plan participants in 2022 and five incentive compensation plan deferral plan participants in both 2023 and 2024. See Note 11, "Incentive and Deferred Compensation Plans".

See accompanying notes to Consolidated Financial Statements.

ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2024, 2023 and 2022

(in thousands)

						2024						2023						2022
Cash flows from operating activities
Management fee received						$	2,898,367					$	2,420,192					$	2,100,989
Administrative services reimbursements received						776,150						721,928						668,857
Service agreement revenue received						26,346						26,018						25,515
Net investment income received						67,643						57,448						40,161
Commissions paid to agents						(1,443,296)						(1,200,014)						(1,042,158)
Incentive compensation paid to agents						(94,864)						(120,211)						(136,403)
Salaries and wages paid						(249,137)						(226,036)						(208,575)
Pension contribution and employee benefits paid						(110,764)						(169,762)						(68,433)
General operating expenses paid						(308,273)						(293,857)						(263,524)
Administrative services expenses paid						(791,050)						(730,129)						(667,524)
Income taxes paid						(159,873)						(104,372)						(80,619)
Interest paid						—						—						(2,134)
Net cash provided by operating activities						611,249						381,205						366,152
Cash flows from investing activities
Purchase of investments:
Available-for-sale securities						(473,647)						(279,999)						(465,071)
Equity securities						(32,799)						(35,480)						(18,929)
Other investments						(7,075)						(88)						(157)
Proceeds from investments:
Available-for-sale securities sales						205,159						160,614						295,996
Available-for-sale securities maturities/calls						196,641						76,617						130,401
Equity securities						35,894						24,458						20,456
Other investments						54						871						429
Purchase of fixed assets						(124,845)						(92,647)						(67,204)
Proceeds from disposal of fixed assets						—						—						265
Loans to agents and others						(36,362)						(20,525)						(11,631)
Collections on agent loans						10,068						8,614						8,523
Net cash used in investing activities						(226,912)						(157,565)						(106,922)
Cash flows from financing activities
Dividends paid to shareholders						(237,508)						(221,675)						(206,772)
Net changes in cash collateral for securities lent						7,513						—						—
Proceeds from short-term borrowings						—						—						55,000
Payments on short-term borrowings						—						—						(55,000)
Payments on long-term borrowings						—						—						(94,070)
Net cash used in financing activities						(229,995)						(221,675)						(300,842)
Net increase (decrease) in cash, cash equivalents and restricted cash						154,342						1,965						(41,612)
Cash, cash equivalents and restricted cash, beginning of year						144,055						142,090						183,702
Cash, cash equivalents and restricted cash, end of year						$	298,397					$	144,055					$	142,090
Supplemental disclosure of noncash transactions
Liability incurred to purchase fixed assets						$	15,254					$	—					$	26,386
Operating lease assets obtained in exchange for lease liabilities						$	7,871					$	5,866					$	7,650

See accompanying notes to Consolidated Financial Statements. See Note 18, "Supplementary Data on Cash Flows", for additional supplemental cash flow information.

ERIE INDEMNITY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. 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 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 Indemnity as each subscriber's attorney-in-fact to transact certain business on their behalf. In accordance with the subscriber's agreement for acting as attorney-in-fact in these two capacities, we retain a management fee calculated as a percentage of the direct and affiliated assumed premiums written by the Exchange.

The policy issuance and renewal services we provide on behalf of the subscribers at the Exchange are related to the sales, underwriting and issuance of policies. The sales related services we provide include agent compensation and certain sales and advertising support services. Agent compensation includes scheduled commissions to agents based upon premiums written as well as incentive compensation, which is earned by achieving targeted measures. Agent compensation comprised approximately 69% of our 2024 policy issuance and renewal expenses. The underwriting services we provide include underwriting and policy processing and comprised approximately 9% of our 2024 policy issuance and renewal expenses. The remaining services we provide include customer service and administrative support. We also provide information technology services that support all the functions listed above that comprised approximately 9% of our 2024 policy issuance and renewal expenses. Included in these expenses are allocations of costs for departments that support these policy issuance and renewal functions.

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

Our results of operations are tied to the growth and financial condition of the Exchange. If any events occurred that impaired the Exchange’s ability to grow or sustain its financial condition, including but not limited to reduced financial strength ratings, disruption in the independent agency relationships, significant catastrophe losses or products not meeting customer demands, the Exchange could find it more difficult to retain its existing business and attract new business. A decline in the business of the Exchange almost certainly could have as a consequence a decline in the total premiums paid and a correspondingly adverse effect on the amount of the management fees we receive. We also have an exposure to a concentration of credit risk related to the unsecured receivables due from the Exchange for net management fee and other reimbursements. See Note 16, "Concentrations of Credit Risk".

Note 2. Significant Accounting Policies

Basis of presentation

The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP") and include the accounts of Indemnity and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated.

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 adopted accounting standards

We adopted Accounting Standards Update ("ASU") 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures", effective with the annual reporting period ending December 31, 2024. We applied the guidance retrospectively to prior periods presented in the consolidated financial statements based on the significant segment expense categories identified and disclosed in the period of adoption. As an entity with a single reportable segment, we disclose significant segment expenses that are regularly provided to our chief operating decision maker and included within each reported period of profit or loss, and all applicable disclosures required by Topic 280. The adoption of this guidance had no impact on our consolidated financial statements. The additional disclosures required by this guidance have been included in Note 4, "Segment Information".

Recently issued accounting standards and disclosure rules

In December 2023, the Financial Accounting Standards Board ("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. We plan to adopt the standard in our consolidated financial statements for the year ending December 31, 2025, and we expect the standard will impact certain of our income tax disclosures.

In March 2024, the Securities and Exchange Commission ("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.

In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses", which requires entities to disclose disaggregated information about certain income statement expense line items. The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments can be applied on either a prospective or retrospective basis. This will have no impact on our consolidated financial statements, and we are currently evaluating the impact of adoption on our disclosures.

Cash and cash equivalents

Cash, money market accounts and other short-term, highly liquid investments with a maturity of three months or less at the date of purchase, are considered cash and cash equivalents.

Restricted cash – Restricted cash represents deposits held for the benefit of third parties related primarily to our agent loan participation program. These restricted funds are invested in bank deposits, contractually restricted as to withdrawal or usage, and included with "Cash and cash equivalents" in our Consolidated Statements of Financial Position.

Investments

Available-for-sale securities – Fixed maturity debt securities and redeemable preferred stock are classified as available-for-sale and reported at fair value with unrealized investment gains and losses, net of income taxes, recognized in other comprehensive income. Available-for-sale securities with a remaining maturity of 12 months or less and any security that we intend to sell as of the reporting date are classified as current assets.

Available-for-sale securities in an unrealized loss position are evaluated to determine whether the impairment is a result of credit loss or other factors. If we have the intent to sell or it's more likely than not that we would be required to sell the security before recovery of the amortized cost basis, the entire impairment is recognized in earnings. Securities that have experienced a decline in fair value that we do not intend to sell, and that we will not be required to sell before recovery, are evaluated to determine if the decline in fair value is credit related. Impairment resulting from a credit loss is recognized in earnings with a corresponding allowance on the Consolidated Statement of Financial Position. Future recoveries of credit loss result in an adjustment to the allowance and earnings in the period the credit conditions improve. Factors considered in the evaluation of credit loss include the extent to which fair value is less than cost and fundamental factors specific to the issuer such as financial condition, changes in credit ratings, near and long-term business prospects and other factors, as well as the likelihood of recovery of the amortized cost of the security. If the qualitative review indicates credit impairment, the allowance for credit loss is measured as the amount that the security’s amortized cost exceeds the present value of cash flows expected to be collected and is limited to the amount that fair value is below amortized cost.

Equity securities – Equity securities primarily include non-redeemable preferred stocks that are reported at fair value with changes in the fair value recognized in net realized and unrealized investment gains (losses). Securities that we intend to sell as of the reporting date are classified as current assets.

Realized gains and losses and investment income – Realized gains and losses on sales of available-for-sale and equity securities are recognized in income based upon the specific identification method and reported in net realized and unrealized investment gains (losses). Interest income is recognized as earned and includes amortization of premium and accretion of discount. Income is recognized based on the constant effective yield method, which includes periodically updated prepayment assumptions obtained from third party data sources on our prepaying securities. The effective yield for prepaying securities is recalculated on a retrospective basis. Dividend income is recognized at the ex-dividend date. Interest and dividend income and the results of our limited partnership investments are reported as net investment income. We do not record an allowance for credit losses on accrued investment income on our available-for-sale securities as any amount deemed uncollectible is reversed from interest income in the period the expected payment defaults.

Securities lending – Beginning in May 2024 we entered into securities lending transactions, managed by a third-party banking institution, whereby securities are loaned to unaffiliated financial institutions for short periods of time. The securities lending activity is accounted for as a secured borrowing and therefore the securities loaned, primarily available-for-sale securities, are carried as invested assets on our Consolidated Statement of Financial Position, while the obligation to return the cash collateral is recorded as a current liability. The cash collateral received at the inception of the loan is reinvested and the related income is recognized in net investment income. Noncash collateral is not recorded in the Consolidated Statement of Financial Position, as we do not have the right to sell, repledge, or otherwise reinvest the noncash collateral.

The collateral is required to equal a minimum of 102% of the estimated fair value of the securities loaned, and maintained at a level greater than or equal to 100% for the duration of the loan. We monitor the ratio of the collateral held to the estimated fair value of the securities loaned on a daily basis and obtain additional collateral as necessary. A securities lending transaction may be terminated at any time by the borrower or the lender. If terminated, we would repay our securities lending obligations from the sale of reinvested collateral or the proceeds of sales from our investment portfolio, which includes liquid securities.

Deferred taxes

Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and the reported amounts in the consolidated financial statements, using the statutory tax rates in effect for the year in which the differences are expected to settle or be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date under the law. The need for valuation allowances on deferred tax assets are estimated based upon our assessment of the realizability of such amounts.

Fixed assets

Fixed assets are stated at cost less accumulated depreciation and amortization. Fixed assets are primarily comprised of software, which includes internally used capitalized software and development costs, as well as buildings and building improvements, equipment, furniture and fixtures, and leasehold improvements. Assets in use are depreciated using the straight-line method over the estimated useful life except for leasehold improvements, which are depreciated over the shorter of their

economic useful life or the lease term. Software is depreciated over periods ranging from 3-7 years, buildings and building improvements are depreciated over 20-45 years, equipment is depreciated over 3-10 years, and furniture and fixtures are depreciated over 7 years. We review long-lived assets for impairment whenever events or changes indicate that the carrying value may not be recoverable. Under these circumstances, if the fair value were less than the carrying amount of the asset, we would recognize a loss for the difference.

Agent loans

Agent loans, the majority of which are senior secured, are carried at unpaid principal balance net of a current expected credit loss allowance with interest recorded in investment income as earned. The allowance is estimated using available loss history and/or external loss rates based on comparable loan losses and considers current market conditions and forecasted information. Changes to the allowance are recognized in earnings as adjustments to net impairment recoveries (losses). Any current portion of agent loans is recorded in prepaid expenses and other current assets.

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 and held-to-maturity securities include investments 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.

Agent incentive compensation liability

Our more significant agent incentive compensation plan is based upon an individual agency's property and casualty underwriting profitability and also includes a component for growth in agency property and casualty premiums if the agency's underwriting profitability targets for the book of business are met. The estimated liability for this agent incentive compensation plan is based upon the performance over 36 months, and is modeled on a monthly basis using actual underwriting results for the two prior years and current year-to-date actual results and forecasted results for the remainder of the year. Our second agent incentive compensation plan is based on an agency's one-year underwriting profitability and uses a similar model but considers actual and forecasted results for a calendar year only. At December 31 of each year, we use actual data available and record an accrual based upon the expected payment amount. These costs are included in cost of operations - policy issuance and renewal services.

Recognition of management fee revenue

We retain management fees from the Exchange under the subscriber’s agreement for services provided. In accordance with the subscriber’s agreement, we may retain up to 25% of all direct and affiliated assumed premiums written by the Exchange. The management fee rate is set at least annually by our Board of Directors. The management fee revenue is calculated by multiplying the management fee rate by the direct and affiliated assumed premiums written by the Exchange and is allocated between the two performance obligations we have under the subscriber's agreement. The first performance obligation is to provide policy issuance and renewal services. The second performance obligation is acting as the attorney-in-fact with respect to various administrative services as enumerated in the subscriber's agreement.

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

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

Administrative services

Consistent with its legal structure as a reciprocal insurer, the Exchange does not have any employees or officers. Therefore, it enters into contractual relationships by and through the subscribers' attorney-in-fact. Indemnity serves as the attorney-in-fact on

behalf of the subscribers at the Exchange with respect to its administrative services as enumerated in the subscriber's agreement. The Exchange's insurance subsidiaries also utilize Indemnity for these services in accordance with the service agreements between each of the subsidiaries and Indemnity. 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. Common overhead expenses and certain service department costs incurred by us on behalf of the subscribers at the Exchange and its insurance subsidiaries are reimbursed by the proper entity based upon relevant utilization statistics specifically measured to accomplish proportional allocations, which we believe are reasonable. In 2024, approximately 70% of the administrative services expenses were entirely attributable to the respective administrative functions (claims handling, life insurance management and investment management), while the remaining 30% of these expenses were allocations of costs for departments that support these administrative functions. The expenses we incur and related reimbursements we receive for administrative services are presented gross in our Consolidated Statements of Operations. The subscriber's agreement and service agreements provide for reimbursement of amounts incurred for these services to Indemnity. Reimbursements are settled at cost on a monthly basis. State insurance regulations require that intercompany service agreements and any material amendments be approved in advance by the state insurance department.

Recognition of 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. Service charges, which are fixed dollar charges for each installment billed beyond the first installment, are recognized as revenue when bills are rendered to the policyholder. Service agreement revenue also includes late payment and policy reinstatement fees, which are also recognized as revenue when bills are rendered to the policyholder. We also have a service agreement with the Exchange for the use of shared office space. Revenue related to this agreement is recognized at the time the space is used based on relevant utilization statistics.

Note 3. Revenue

The majority of our revenue is derived from the subscriber’s agreement between us and the subscribers (policyholders) at the Exchange. In accordance with the subscriber’s agreement, we 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 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.

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. 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 Consolidated Statements of Financial Position. For the years ended December 31, 2024, 2023, and 2022, we recognized revenue of $41.2 million, $36.5 million, and $34.9 million, respectively, that was included in the contract liability balance at the beginning of the respective periods. The administrative services expenses we incur and the related reimbursements we receive are recorded gross in the Consolidated Statements of Operations.

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

The following table disaggregates revenue by our two performance obligations for the years ended December 31:

(in thousands)						2024						2023						2022
Management fee revenue - policy issuance and renewal services						$	2,894,074					$	2,442,073					$	2,087,846
Management fee revenue - administrative services						68,355						63,669						58,323
Administrative services reimbursement revenue						806,336						737,139						668,268
Total revenue from administrative services						$	874,691					$	800,808					$	726,591

Note 4. Segment Information

We have one reportable segment: management operations. All segment revenue is derived in the United States, the majority of which is from the subscriber’s agreement between us and the subscribers (policyholders) at the Exchange, our sole customer, as further described in Note 3, "Revenue". Our chief operating decision maker ("CODM") is our Executive Council, which includes our Chief Executive Officer ("CEO"), Chief Financial Officer, executive vice presidents and certain senior vice presidents reporting directly to the CEO as applicable. The CODM assesses performance for the management operations segment and decides how to allocate resources based on net income, as reported in our Consolidated Statements of Operations. Net income is used to monitor budget versus actual results. Total assets as reported in our Consolidated Statements of Financial Position, all of which are located in the United States, are reviewed by the CODM for purposes of decision making. The accounting policies of our management operations segment are the same as those described in Note 2, "Significant Accounting Policies".

The following table presents our management operations segment revenue, significant segment expenses regularly provided to the CODM and net income for the years ended December 31:

(in thousands)			2024						2023						2022
Management fee revenue			$	2,962,429					$	2,505,742					$	2,146,169
Administrative services reimbursement revenue			806,336						737,139						668,268
Service agreement revenue			26,350						26,059						25,687
Total operating revenue			3,795,115						3,268,940						2,840,124
Commissions			1,601,401						1,348,530						1,179,569
Underwriting and policy processing			199,485						181,003						171,625
Information technology			215,488						216,746						198,157
Sales and advertising			66,480						58,905						60,000
Customer service			43,045						34,391						34,333
Administrative and other			186,425						171,970						151,958
Cost of operations - policy issuance and renewal services			2,312,324						2,011,545						1,795,642
Cost of operations - administrative services			806,336						737,139						668,268
Total operating expenses (1)			3,118,660						2,748,684						2,463,910
Operating income			676,455						520,256						376,214
Total investment income			69,260						28,968						632
Interest expense, net			—						—						2,009
Other income			11,564						12,712						1,615
Income tax expense			156,965						115,875						77,883
Net income			$	600,314					$	446,061					$	298,569

(1) See Note 8, "Fixed Assets", for management operations segment depreciation and amortization expense included in "Total operating expenses", as reported on our Consolidated Statements of Operations. See our Consolidated Statements of Cash Flows for segment

expenditures on fixed asset additions.

Note 5. 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 13, "Capital Stock".

Class A diluted earnings per share are calculated under the if-converted method, which reflects the conversion of Class B shares to Class A shares. Diluted earnings per share calculations include the dilutive effect of assumed issuance of stock-based awards under compensation plans that have the option to be paid in stock using the treasury stock method. See Note 11, "Incentive and Deferred Compensation Plans".

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:

(dollars in thousands, except per share data)																								For the years ended December 31,
						2024																		2023																		2022
						Allocated net income (numerator)						Weighted shares (denominator)						Per- share amount						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						$	595,399					46,189,044						$	12.89					$	442,409					46,188,981						$	9.58					$	296,125					46,188,916						$	6.41
Dilutive effect of stock-based awards						0						16,422						—						0						9,630						—						0						8,274						—
Assumed conversion of Class B shares						4,915						6,100,800						—						3,652						6,100,800						—						2,444						6,100,800						—
Class A – Diluted EPS:
Income available to Class A stockholders on Class A equivalent shares						$	600,314					52,306,266						$	11.48					$	446,061					52,299,411						$	8.53					$	298,569					52,297,990						$	5.71
Class B – Basic EPS:
Income available to Class B stockholders						$	4,915					2,542						$	1,934					$	3,652					2,542						$	1,437					$	2,444					2,542						$	962
Class B – Diluted EPS:
Income available to Class B stockholders						$	4,914					2,542						$	1,933					$	3,652					2,542						$	1,437					$	2,444					2,542						$	962

Note 6. 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 December 31, 2024, nearly all of our available-for-sale and equity securities were priced using a third party pricing service.

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

						December 31, 2024
(in thousands)						Total						Level 1						Level 2						Level 3
Available-for-sale securities:
Corporate debt securities (1)						$	643,943					$	0					$	637,675					$	6,268
Collateralized debt obligations						114,127						0						114,127						0
Commercial mortgage-backed securities						124,982						0						100,893						24,089
Residential mortgage-backed securities						133,812						0						133,812						0
Other debt securities						26,751						0						26,751						0
Total available-for-sale securities						1,043,615						0						1,013,258						30,357
Equity securities:
Financial services sector						69,930						1,052						65,378						3,500
Utilities sector						5,629						0						5,629						0
Energy sector						4,117						0						4,117						0
Consumer sector						3,341						54						1,787						1,500
Technology sector						1,974						0						0						1,974
Communications sector						900						0						900						0
Total equity securities						85,891						1,106						77,811						6,974
Total						$	1,129,506					$	1,106					$	1,091,069					$	37,331

(1) This includes $7.3 million of securities lent under a securities lending agreement.

						December 31, 2023
(in thousands)						Total						Level 1						Level 2						Level 3
Available-for-sale securities:
Corporate debt securities						$	588,688					$	0					$	584,182					$	4,506
Collateralized debt obligations						112,468						0						112,468						0
Commercial mortgage-backed securities						102,720						0						91,726						10,994
Residential mortgage-backed securities						140,055						0						138,521						1,534
Other debt securities						17,310						0						17,310						0
Total available-for-sale securities						961,241						0						944,207						17,034
Equity securities:
Financial services sector						69,900						816						63,750						5,334
Utilities sector						5,810						0						5,810						0
Energy sector						3,901						0						3,901						0
Consumer sector						3,915						0						2,415						1,500
Technology sector						500						0						0						500
Industrial sector						180						0						180						0
Communications sector						47						47						0						0
Total equity securities						84,253						863						76,056						7,334
Total						$	1,045,494					$	863					$	1,020,263					$	24,368

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 – 2024 Year-to-Date Change:

(in thousands)						Beginning balance at December 31, 2023						Included in earnings(1)						Included in other comprehensive income (loss)						Purchases						Sales						Transfers into Level 3(2)						Transfers out of Level 3(2)						Ending balance at December 31, 2024
Available-for-sale securities:
Corporate debt securities						$	4,506					$	(129)					$	126					$	6,708					$	(1,821)					$	8,379					$	(11,501)					$	6,268
Commercial mortgage-backed securities						10,994						(1,519)						664						3,826						(1,571)						30,340						(18,645)						24,089
Residential mortgage-backed securities						1,534						(5)						(24)						0						(40)						0						(1,465)						0
Total available-for-sale securities						17,034						(1,653)						766						10,534						(3,432)						38,719						(31,611)						30,357
Equity securities						7,334						670						—						2,019						(84)						553						(3,518)						6,974
Total Level 3 securities						$	24,368					$	(983)					$	766					$	12,553					$	(3,516)					$	39,272					$	(35,129)					$	37,331

Level 3 Assets – 2023 Year-to-Date Change:

(in thousands)						Beginning balance at December 31, 2022						Included in earnings(1)						Included in other comprehensive income (loss)						Purchases						Sales						Transfers into Level 3(2)						Transfers out of Level 3(2)						Ending balance at December 31, 2023
Available-for-sale securities:
Corporate debt securities						$	3,686					$	4					$	314					$	4,316					$	(1,536)					$	5,611					$	(7,889)					$	4,506
Commercial mortgage-backed securities						10,910						(778)						311						2,575						(621)						5,373						(6,776)						10,994
Residential mortgage-backed securities						4,184						(5)						96						0						(120)						1,567						(4,188)						1,534
Total available-for-sale securities						18,780						(779)						721						6,891						(2,277)						12,551						(18,853)						17,034
Equity securities						3,779						47						—						3,458						0						1,857						(1,807)						7,334
Total Level 3 securities						$	22,559					$	(732)					$	721					$	10,349					$	(2,277)					$	14,408					$	(20,660)					$	24,368

(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:

						December 31, 2024												December 31, 2023
(in thousands)						Carrying Value						Fair Value						Carrying Value						Fair Value
Agent loans, net (1)						$	92,731					$	90,713					$	67,787					$	66,445
Other loans receivable, net (2)						11,555						11,555						10,713						10,713
Held-to-maturity securities, net (3)						4,833						4,934						—						—

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

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

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

Note 7. Investments

Fixed maturity securities

See Note 6, "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 fixed maturity securities as of:

						December 31, 2024
(in thousands)						Amortized cost						Gross unrealized gains						Gross unrealized losses						Estimated fair value
Available-for-sale securities:
Corporate debt securities (1)						$	647,861					$	4,767					$	8,685					$	643,943
Collateralized debt obligations						114,142						372						387						114,127
Commercial mortgage-backed securities						126,509						1,458						2,985						124,982
Residential mortgage-backed securities						150,212						62						16,462						133,812
Other debt securities						27,232						147						628						26,751
Total available-for-sale securities, net						1,065,956						6,806						29,147						1,043,615
Held-to-maturity securities - states & political subdivisions						4,833						101						0						4,934
Total fixed maturity securities, net						$	1,070,789					$	6,907					$	29,147					$	1,048,549

(1) This includes an estimated fair value of $7.3 million of securities lent under a securities lending agreement.

						December 31, 2023
(in thousands)						Amortized cost						Gross unrealized gains						Gross unrealized losses						Estimated fair value
Available-for-sale securities:
Corporate debt securities						$	600,639					$	4,594					$	16,545					$	588,688
Collateralized debt obligations						114,400						156						2,088						112,468
Commercial mortgage-backed securities						106,019						1,410						4,709						102,720
Residential mortgage-backed securities						153,633						69						13,647						140,055
Other debt securities						17,862						136						688						17,310
Total available-for-sale securities, net						$	992,553					$	6,365					$	37,677					$	961,241

The amortized cost and estimated fair value of available-for-sale and held-to-maturity securities at December 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.

						December 31, 2024
						Amortized						Estimated
(in thousands)						cost						fair value
Available-for-sale securities:
Due in one year or less						$	45,052					$	44,430
Due after one year through five years						454,563						451,762
Due after five years through ten years						186,208						185,333
Due after ten years						380,133						362,090
Total available-for-sale securities, net (1) (2)						1,065,956						1,043,615
Held-to-maturity securities - due after ten years						4,833						4,934
Total fixed maturity securities, net						$	1,070,789					$	1,048,549

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

(2) This includes an estimated fair value of $7.3 million of securities lent under a securities lending agreement.

The below securities have been evaluated for credit impairment using criteria described within Note 2, "Significant Accounting

Policies". The gross unrealized losses are primarily attributable to changes in interest rates and are not deemed to be credit-related. We do not have the intent to sell these securities and it is more likely than not that we would not be required to 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:

						December 31, 2024
						Less than 12 months												12 months or longer												Total
(dollars in thousands)						Fair value						Unrealized losses						Fair value						Unrealized losses						Fair value						Unrealized losses						No. of holdings
Corporate debt securities						$	197,619					$	2,486					$	156,059					$	6,199					$	353,678					$	8,685					567
Collateralized debt obligations						33,686						71						11,762						316						45,448						387						77
Commercial mortgage-backed securities						28,333						407						24,966						2,578						53,299						2,985						131
Residential mortgage-backed securities						38,003						1,289						90,209						15,173						128,212						16,462						169
Other debt securities						11,663						150						5,045						478						16,708						628						42
Total available-for-sale securities						$	309,304					$	4,403					$	288,041					$	24,744					$	597,345					$	29,147					986
Quality breakdown of available-for-sale securities:
Investment grade						$	280,332					$	3,701					$	260,480					$	22,664					$	540,812					$	26,365					616
Non-investment grade						28,972						702						27,561						2,080						56,533						2,782						370
Total available-for-sale securities						$	309,304					$	4,403					$	288,041					$	24,744					$	597,345					$	29,147					986

						December 31, 2023
						Less than 12 months												12 months or longer												Total
(dollars in thousands)						Fair value						Unrealized losses						Fair value						Unrealized losses						Fair value						Unrealized losses						No. of holdings
Corporate debt securities						$	50,853					$	546					$	338,322					$	15,999					$	389,175					$	16,545					590
Collateralized debt obligations						3,911						15						87,005						2,073						90,916						2,088						142
Commercial mortgage-backed securities						9,148						157						30,145						4,552						39,293						4,709						108
Residential mortgage-backed securities						30,271						297						101,761						13,350						132,032						13,647						164
Other debt securities						2,084						62						7,475						626						9,559						688						32
Total available-for-sale securities						$	96,267					$	1,077					$	564,708					$	36,600					$	660,975					$	37,677					1,036
Quality breakdown of available-for-sale securities:
Investment grade						$	87,774					$	807					$	517,090					$	32,511					$	604,864					$	33,318					651
Non-investment grade						8,493						270						47,618						4,089						56,111						4,359						385
Total available-for-sale securities						$	96,267					$	1,077					$	564,708					$	36,600					$	660,975					$	37,677					1,036

Credit loss allowances

The following tables present a roll-forward of the allowances for credit losses on investments for the years ended December 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						484						2,167						1,117						355
Sales/collections and write-offs						(568)						0						0						0
Balance, end of period						$	513					$	2,167					$	12,198					$	1,312

						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						670						—						7,404						0
Sales/collections and write-offs						(322)						—						(98)						0
Balance, end of period						$	597					$	—					$	11,081					$	957

Net investment income

Investment income (loss), net of expenses, was generated from the following portfolios for the years ended December 31:

(in thousands)						2024						2023						2022
Available-for-sale securities						$	49,605					$	42,563					$	31,913
Equity securities						4,758						4,493						3,904
Limited partnerships (1)						1,971						(11,308)						(10,446)
Cash equivalents and other						15,461						9,179						4,510
Total investment income						71,795						44,927						29,881
Less: investment expenses						1,640						355						1,296
Net investment income						$	70,155					$	44,572					$	28,585

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

Net realized and unrealized investment gains (losses)

Realized and unrealized gains (losses) on investments were as follows for the years ended December 31:

(in thousands)						2024						2023						2022
Available-for-sale securities:
Gross realized gains						$	3,415					$	804					$	1,169
Gross realized losses						(5,035)						(7,523)						(15,219)
Net realized losses on available-for-sale securities						(1,620)						(6,719)						(14,050)
Equity securities						4,848						871						(13,238)
Miscellaneous						1						10						2
Net realized and unrealized investment gains (losses)						$	3,229					$	(5,838)					$	(27,286)

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

(in thousands)						2024						2023						2022
Equity securities:
Net gains (losses) recognized during the period						$	4,848					$	871					$	(13,238)
Less: net gains (losses) recognized on securities sold						1,213						(2,328)						(1,866)
Net unrealized gains (losses) recognized on securities held at reporting date						$	3,635					$	3,199					$	(11,372)

Net impairment losses recognized in earnings

Impairments on investments were as follows for the years ended December 31:

(in thousands)						2024						2023						2022
Available-for-sale securities:
Intent to sell						$	(299)					$	(1,759)					$	(167)
Credit impaired						(484)						(670)						(500)
Total available-for-sale securities						(783)						(2,429)						(667)
Expected credit losses:
Held-to-maturity securities						(2,167)						—						—
Agent loans						(355)						0						0
Other loans receivable						(819)						(7,337)						0
Net impairment losses recognized in earnings						$	(4,124)					$	(9,766)					$	(667)

Securities lending transactions

As of December 31, 2024, the estimated fair value of loaned securities, comprised of corporate debt securities, was $7.3 million and the related cash collateral received was $7.5 million, which was reinvested in cash equivalents and is included with "Cash and cash equivalents" in our Consolidated Statement of Financial Position. There was no collateral that we are not permitted to sell or repledge and there are no securities lending transactions that extend beyond one year from the reporting date.

If we have to return cash collateral on short notice, we may have difficulty selling investments in a timely manner, be forced to sell them for less than we otherwise would have been able to realize, or both. In addition, in the event of such forced sale, for securities in an unrealized loss position, realized losses would be incurred on securities sold and impairments would be incurred, if there is a need to sell securities prior to recovery, which may negatively impact our financial condition.

Note 8. Fixed Assets

The following table summarizes our fixed assets by category as of December 31:

(in thousands)						2024						2023
Software						$	351,814					$	304,452
Land, buildings, and building improvements						233,647						216,578
Equipment						52,122						46,588
Furniture and fixtures						22,944						21,800
Leasehold improvements						1,378						1,378
Construction in progress						46,302						22,683
Projects in progress						81,616						64,585
Total fixed assets, gross						789,823						678,064
Less: Accumulated depreciation and amortization						(276,329)						(235,454)
Fixed assets, net						$	513,494					$	442,610

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

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

Depreciation and amortization expense totaled $56.5 million, $47.4 million and $45.9 million for the years ended December 31, 2024, 2023 and 2022, respectively, and is included in total operating expenses. The Exchange and its insurance subsidiaries reimbursed us for approximately 28%, 27% and 20% in 2024, 2023 and 2022, respectively, for annual depreciation and amortization expense on assets supporting administrative services.

Note 9. 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 November 1, 2029. As of December 31, 2024, a total of $99.2 million remains available under the facility due to $0.8 million outstanding letters of credit, which reduce the availability for letters of credit to $24.2 million. We had no borrowings outstanding on our line of credit as of December 31, 2024. Investments with a fair value of $118.6 million were pledged as collateral on the line of credit at December 31, 2024. These investments have no trading restrictions and are reported as available-for-sale securities and cash and cash equivalents on our Consolidated Statement of Financial Position as of December 31, 2024. The bank requires compliance with certain covenants, which include leverage ratios and debt restrictions. We are in compliance with all covenants at December 31, 2024.

Note 10. 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 insurance subsidiaries for their allocated share of pension income or 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. In 2024, we reimbursed the Exchange and its insurance subsidiaries for approximately 60% of the annual defined benefit pension income, and the Exchange and its insurance 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 allocated to the Exchange and its insurance subsidiaries. For our unfunded SERP, we pay the obligations when due and amounts are settled in cash between entities when there is a payout.

Pension plan (income) cost

Pension plan (income) cost includes the following components for the years ended December 31:

(in thousands)
						2024						2023						2022
Service cost for benefits earned						$	34,554					$	28,763					$	50,242
Interest cost on benefit obligation						52,688						50,193						39,764
Expected return on plan assets						(80,793)						(68,869)						(54,557)
Prior service cost amortization						1,611						1,446						1,443
Net actuarial (gain) loss amortization						(6,859)						(15,331)						7,320
Settlement gain (1)						(1,338)						—						—
Pension plan (income) cost (2)						$	(137)					$	(3,798)					$	44,212

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

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

Actuarial assumptions

The following table describes the weighted-average assumptions used to measure benefit obligations at December 31:

						2024						2023
Employee pension plan:
Discount rate						5.87		%				5.34		%
Expected return on assets						7.00						6.50
Rate of compensation increase – age-graded						5.01						3.25
SERP:
Discount rate						5.65		%				5.11		%
Rate of compensation increase						7.00						5.00

The following table describes the weighted-average assumptions used to measure net periodic benefit costs for the years ended December 31:

						2024						2023						2022
Employee pension plan:
Discount rate						5.34		%				5.67		%				3.16		%
Expected return on assets						7.00						6.50						5.50
Rate of compensation increase – age-graded						4.31						3.30						3.21
SERP:
Discount rate (1)						5.12		%				5.46		%				3.11		%
Rate of compensation increase						5.00						5.00						5.00

(1) Settlement accounting was required due to lump sum payments made under the SERP in 2024. The discount rates in effect at the January 1, June 1, and September 1 measurement dates were 5.11%, 5.53%, and 5.12%, respectively.

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

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

Funding policy/funded status

Our defined benefit pension plan funding policy is generally to contribute an amount equal to the greater of the target normal cost for the plan year, or the amount necessary to fund the plan to 100%. Accordingly, we made a $95 million contribution during 2023 and a $33 million contribution during 2024. We also made a contribution of $39 million in January 2025. The pension asset is presented separately from the unfunded plan as a non-current asset on the Consolidated Statements of Financial Position. The following table sets forth the funded status of the pension plans and the amounts recognized in the Consolidated Statements of Financial Position at December 31:

(in thousands)
						2024						2023
Funded status at end of year						$	(11,718)					$	3,325
Pension asset						$	21,311					$	34,320
Pension liabilities – due within one year (1)						(4,959)						(4,735)
Pension liabilities – due after one year						(28,070)						(26,260)
Net amount recognized						$	(11,718)					$	3,325

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

Benefit obligations

Benefit obligations are described in the following tables. Accumulated and projected benefit obligations represent the obligations of a pension plan for past service as of the measurement date. The accumulated benefit obligation is the present value of pension benefits earned as of the measurement date based on employee service and compensation prior to that date. It differs from the projected benefit obligation in that the accumulated benefit obligation includes no assumptions to reflect expected future compensation. The following table sets forth a reconciliation of beginning and ending balances of the projected benefit obligation, as well as the accumulated benefit obligation at December 31:

(in thousands)
						2024						2023
Projected benefit obligation, beginning of year						$	993,554					$	883,814
Service cost for benefits earned						34,554						28,763
Interest cost on benefit obligation						52,688						50,193
Plan amendments						1,146						583
Actuarial (gain) loss						(28,250)						65,041
Benefits paid						(35,924)						(34,840)
Settlements						(4,001)						—
Projected benefit obligation, end of year						$	1,013,767					$	993,554
Accumulated benefit obligation, end of year						$	860,855					$	847,143

The SERP had a projected benefit obligation in excess of plan assets at December 31:

(in thousands)
						2024						2023
Projected benefit obligation						$	33,029					$	30,995
Plan assets						—						—

The SERP had an accumulated benefit obligation in excess of plan assets at December 31:

(in thousands)
						2024						2023
Accumulated benefit obligation						$	22,761					$	22,698
Plan assets						—						—

Plan assets

The following table sets forth a reconciliation of beginning and ending balances of the fair value of plan assets at December 31:

(in thousands)
						2024						2023
Fair value of plan assets, beginning of year						$	996,879					$	829,866
Actual return on plan assets						8,034						105,631
Employer contributions						37,061						96,222
Benefits paid						(35,924)						(34,840)
Settlements						(4,001)						—
Fair value of plan assets, end of year						$	1,002,049					$	996,879

Accumulated other comprehensive loss (income)

Net actuarial loss (gain) and prior service cost included in accumulated other comprehensive loss (income) that were not yet recognized as components of net benefit costs were as follows at December 31:

(in thousands)
						2024						2023
Net actuarial loss (gain)						$	26,752					$	(25,954)
Prior service cost						11,050						11,515
Net amount not yet recognized						$	37,802					$	(14,439)

Other comprehensive loss (income)

Amounts recognized in other comprehensive loss (income) for pension plans were as follows for the years ended December 31:

(in thousands)
						2024						2023						2022
Net actuarial loss (gain) arising during the year						$	44,509					$	28,279					$	(89,768)
Amortization of net actuarial gain (loss)						6,859						15,331						(7,320)
Amortization of prior service cost						(1,611)						(1,446)						(1,443)
Plan amendments (1)						1,146						583						1,620
Settlement gain						1,338						—						—
Total recognized in other comprehensive loss (income)						$	52,241					$	42,747					$	(96,911)

(1) Plan amendments relate to new SERP participants.

Asset allocation

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

The target and actual asset allocations for the portfolio are as follows for the years ended December 31:

						Target asset allocation (1)						Target asset allocation						Actual asset allocation						Actual asset allocation
Asset allocation:						2024						2023						2024						2023
Equity securities:
U.S. equity securities						21		%				27		%				21		%	(2)			26		%
Non-U.S. equity securities						14						18						14			(3)			19
Total equity securities						35						45						35						45
Debt securities						64						54						63			(4)			54
Other						1						1						2			(5)			1
Total						100		%				100		%				100		%				100		%

(1) Changes to the target asset allocation in 2024 were made to reduce investment risk by shifting portfolio assets from equity securities to debt securities.

(2) U.S. equity securities – 100% seek to achieve excess returns relative to the Russell 3000 Index.

(3) Non-U.S. equity securities – 11% are allocated to international small cap investments, while another 20% are allocated to international emerging market investments. The remaining 69% of the Non-U.S. equity securities are allocated to investments seeking to achieve excess returns relative to an international market index.

(4) Debt securities – 59% are allocated to long U.S. Treasury Strips, 41% are allocated to U.S. corporate bonds with an emphasis on long duration bonds rated A or better.

(5) Institutional money market fund.

The following tables present fair value measurements for the pension plan assets by major category and level of input as of:

						December 31, 2024
(in thousands)						Total						Level 1 Fair Value						Level 2 Fair Value						Level 3 Fair Value						Net Asset Value (NAV) (1)
Equity securities:
U.S. equity securities						$	214,942					$	204,588					$	0					$	0					$	10,354
Non-U.S. equity securities						142,401						98,115						0						0						44,286
Total equity securities						357,343						302,703						0						0						54,640
Debt securities						628,961						0						0						0						628,961
Other						15,745						15,745						0						0						0
Total						$	1,002,049					$	318,448					$	0					$	0					$	683,601

(1) The increase in assets carried at NAV at December 31, 2024, compared to 2023, are due to the changes in the target allocation in 2024.

						December 31, 2023
(in thousands)						Total						Level 1 Fair Value						Level 2 Fair Value						Level 3 Fair Value						Net Asset Value (NAV)
Equity securities:
U.S. equity securities						$	261,400					$	244,979					$	0					$	0					$	16,421
Non-U.S. equity securities						183,007						127,143						0						0						55,864
Total equity securities						444,407						372,122						0						0						72,285
Debt securities						540,762						0						0						0						540,762
Other						11,710						11,710						0						0						0
Total						$	996,879					$	383,832					$	0					$	0					$	613,047

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

Estimated future benefit payments

The following table sets forth amounts of benefits expected to be paid over the next 10 years from our pension plans as of:

(in thousands)
Year ending December 31,						Expected future benefit payments
2025			$			43,777
2026						43,639
2027						46,965
2028						50,853
2029						54,430
2030 - 2034						324,250

Employee savings plan

All full-time and regular part-time employees are eligible to participate in a qualified 401(k) savings plan. We match 100% of the participant contributions up to 3% of compensation and 50% of participant contributions over 3% and up to 5% of compensation. Matching contributions paid to the plan were $21.0 million in 2024, $18.4 million in 2023, and $16.7 million in 2022. The Exchange and its insurance subsidiaries reimbursed us for approximately 61% of the matching contributions. Employees are permitted to invest the employer-matching contributions in our Class A common stock. Employees, other than executive and senior officers, may sell the shares at any time without restriction, provided they are in compliance with applicable insider trading laws; sales by executive and senior officers are subject to additional pre-clearance restrictions imposed by our insider trading policies. The plan acquires shares in the open market necessary to meet the obligations of the plan. Plan participants held 0.1 million shares of our Class A common stock at December 31, 2024 and 2023.

Note 11. Incentive and Deferred Compensation Plans

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

Annual incentive plan

Our annual incentive plan ("AIP") is a bonus plan that pays cash to our executives, senior vice presidents and other selected officers annually. Participants can elect to defer up to 100% of the award under either the deferred compensation plan or the incentive compensation deferral plan. If the funding qualifier is met, plan participants are eligible to receive the award based upon attainment of corporate and individual performance measures, which can include various financial measures. The measures are established at the beginning of each year by the ECDC, with ultimate approval by the full Board of Directors. The corporate performance measures included the reported growth in direct written premium and policies in force, and statutory combined ratio of the Exchange and its property and casualty subsidiaries for all periods presented.

Long-term incentive plan

Our long-term incentive plan ("LTIP") is an incentive plan designed to reward executives, senior vice presidents and other selected officers who can have a significant impact on our long-term performance, and to further align the interests of such employees with those of our shareholders.

The LTIP permits grants of performance shares or units, or phantom performance shares, based on the level of achievement of performance goals as defined by us. Performance measures and a peer group of property and casualty companies to be used for comparison are determined by the ECDC. The performance measures for all periods presented were the reported growth in direct written premium and statutory combined ratio of the Exchange and its property and casualty subsidiaries and return on invested assets over a three-year performance period as compared to the results of the peer group over the same period. Because the performance component of the award is based upon a comparison to results of a peer group over a three-year period, the award accrual is based upon estimates of probable results for the remaining performance period. This estimate is subject to variability if our results or the results of the peer group are substantially different than the results we project. Effective April 23, 2024, for performance periods beginning in or after 2024, the plan was amended to also provide for grants of time-vesting restricted shares or units, or phantom shares, including payment of dividends or dividend equivalent credits on the time-vesting awards, based on continued employment for a specified restricted period. The type of award and form of payment, either in shares of our Class A common stock or cash, are determined by the ECDC at the beginning of each performance period, which is generally a three-year period. The ECDC determined for the 2024-2026 performance period that 75% of the award will be granted in phantom performance shares and 25% will be granted in time-vesting phantom shares, and the plan awards for the 2023-2025 and 2024-2026 performance periods will be paid in cash.

Participants can elect to defer up to 100% of the award under the incentive compensation deferral plan. The number of shares of our common stock authorized for grant under the LTIP is 1.5 million shares. We repurchase our Class A common stock on the open market to settle stock awards under the plan. We do not issue new shares of common stock to settle stock awards. LTIP awards are considered vested at the end of each applicable performance period. The fair value of LTIP awards is measured at each reporting date at the current share price of our Class A common stock. A liability is recorded and compensation expense is recognized ratably over the performance period.

At December 31, 2024, the plan awards for the 2022-2024 performance period, which will be granted as a cash award, were fully vested. Distributions will be made in 2025 once peer group financial information becomes available. The total estimated plan award based upon the peer group information as of September 30, 2024 is $5.5 million. At December 31, 2023, the fully vested plan awards for the 2021-2023 performance period totaled $0.2 million and were awarded to participants in June 2024. At December 31, 2022, the fully vested plan awards for the 2020-2022 performance period totaled $3.8 million and were awarded to participants in June 2023. At December 31, 2021, the fully vested plan awards for the 2019-2021 performance period totaled $3.8 million and were awarded to participants in June 2022.

The Exchange and its insurance subsidiaries reimburse us for compensation costs of employees performing administrative services. Earned compensation costs are allocated to these entities and reimbursed to us in cash once the payout is made. The total compensation cost charged to operations related to these LTIP awards, net of forfeitures, was $1.5 million in 2024, $7.3 million in 2023, and $3.4 million in 2022. The related tax benefits recognized in income were $0.3 million in 2024, $1.5 million in 2023, and $0.7 million in 2022. In 2024, the Exchange and its insurance subsidiaries reimbursed us for approximately 39% of the awards paid under these plans. At December 31, 2024, there was $9.4 million of total unrecognized compensation cost for non-vested LTIP awards related to open performance periods. Unrecognized compensation is expected to be recognized over a period of two years.

Deferred compensation plan

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

Incentive compensation deferral plan

We have an unfunded, non-qualified incentive compensation deferral plan for participants of the AIP and LTIP. Deferred awards will be credited to a deferred stock account as credits denominated in shares of our Class A common stock until retirement or other separation from service. Participants are 100% vested at date of deferral. The shares are then held in a rabbi trust, which was established to hold the shares earned under both the incentive compensation deferral plan and the deferred stock compensation plan for outside directors. The rabbi trust is classified and accounted for as equity in a manner consistent with the accounting for treasury stock. Dividends received on the shares in the rabbi trust are used to purchase additional shares. Vested share credits will be paid to participants from the rabbi trust upon separation from service in approximate equal annual installments of Class A shares for a period of three years. In 2024, the rabbi trust was not required to purchase shares of our common stock in the open market to satisfy the liability for the 2023 AIP and 2021-2023 LTIP performance period awards deferred under the incentive compensation deferral plan, and dividend equivalent credits on rabbi trust shares. In 2023, the rabbi trust purchased 1,608 shares of our common stock in the open market at an average price of $230.71 for $0.4 million to satisfy the liability for the 2022 AIP and 2020-2022 LTIP performance period awards deferred under the incentive compensation deferral plan, and dividend equivalent credits on rabbi trust shares. In 2022, the rabbi trust purchased 7,046 shares of our common stock in the open market at an average price of $176.44 for $1.2 million to satisfy the liability for the 2021 AIP and 2019-2021 LTIP performance period awards deferred under the incentive compensation deferral plan, and dividend equivalent credits on rabbi trust shares.

Deferred compensation plans for outside directors

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

We also have a deferred stock compensation plan for our outside directors to further align the interests of directors with those of our shareholders that provides for payment of a portion of the directors' annual compensation in shares of our Class A common stock. Each director vests in the grant 25% every three months over the course of a year. Dividends paid by us are credited to each director's account and vest immediately. We do not issue new shares of common stock to directors. We repurchase shares of our Class A common stock in the open market to satisfy these awards, which are then held in the rabbi trust. The plan includes a maximum of 250,000 shares that may be issued under the plan and no shares may be credited later than ten years from the date our shareholders last approved the plan.

The rabbi trust purchased 4,044 shares of our common stock on the open market at an average price of $405.60 for $1.6 million in 2024, 5,894 shares at an average price of $238.73 for $1.4 million in 2023 and 6,048 shares at an average price of $201.93 for $1.2 million in 2022 to satisfy the liability of the stock compensation plan for outside directors, and dividend equivalent credits on rabbi trust shares. The shares are distributed to the outside director from the rabbi trust upon ending board service.

Director compensation charged to operations related to these awards totaled $1.1 million in 2024, $0.9 million in 2023 and $0.8 million 2022.

The following table sets forth a reconciliation of beginning and ending balances of our deferred executive compensation liability as of December 31:

(in thousands)
						2024						2023						2022
Deferred executive compensation, beginning of the year						$	31,918					$	25,760					$	27,208
Annual incentive plan awards						8,574						7,401						6,305
Long-term incentive plan awards						1,786						7,332						3,417
Employer match and hypothetical earnings on deferred compensation						4,680						2,828						404
Total plan awards and earnings						15,040						17,561						10,126
Total plan awards paid						(8,105)						(10,211)						(10,413)
Compensation deferred						1,701						1,809						2,528
Distributions from the deferred compensation plans						(2,372)						(313)						(742)
Forfeitures (1)						(244)						—						—
Funding of rabbi trust for deferred stock compensation plan for outside directors						(1,640)						(1,407)						(1,221)
Funding of rabbi trust for incentive compensation deferral plan (2)						(1,703)						(1,281)						(1,726)
Deferred executive compensation, end of the year						$	34,595					$	31,918					$	25,760

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

(2) In 2024, 2023 and 2022, funding includes $1.7 million, $0.9 million and $0.5 million, respectively, representing shares held back to satisfy tax withholding on rabbi trust distributions that reduce funding requirements for performance award deferrals

Equity compensation plan

Our equity compensation plan ("ECP") is designed to reward executives, senior vice presidents and other selected officers and key employees who can have a significant impact on our long-term performance, and to further align the interests of such employees with those of our shareholders. The ECP permits grants of restricted shares, restricted share units and other share based awards, to be satisfied with shares of our Class A common stock or cash. The ECDC determines the form of the award to be granted at the beginning of each performance period. Effective April 23, 2024, the number of shares of our Class A common stock authorized for grant under the ECP increased from 100,000 shares to 250,000 shares, with no one person able to receive more than 10,000 shares in a calendar year. We do not issue new shares of common stock to satisfy plan awards. Share awards are settled through the repurchase of our Class A common stock on the open market. Restricted share awards may be entitled to receive dividends payable during the performance period, or, if subject to performance goals, to receive dividend equivalents payable upon vesting. Dividend equivalents may provide for the crediting of interest or hypothetical investment experience, payable after expiration of the performance period. Vesting conditions are determined at the time the award is granted and may include continuation of employment for a specific period, satisfaction of performance goals within a defined performance period, and the satisfaction of any other terms and conditions as determined to be appropriate.

In 2024, we satisfied the plan liability in cash totaling $3.2 million. In 2023, we purchased 1,610 Class A shares with an average share price of $252.32 and a market value of $0.4 million to satisfy the plan liability. In 2022, we purchased 1,786 shares with an average share price of $190.68 and a market value of $0.3 million to satisfy the plan liability. The total compensation charged to operations related to ECP awards was $6.9 million in 2024, $4.0 million in 2023, and $0.8 million in 2022. The increases in 2024 and 2023 compared to the respective prior periods resulted from increases in plan participants and our stock price. The Exchange and its insurance subsidiaries reimburse us for earned compensation costs of employees performing administrative services, which can fluctuate each year based on the plan participants. The Exchange and its insurance subsidiaries reimbursed us for approximately 35%, 35%, and 3% of the awards paid in 2024, 2023, and 2022 respectively. Unearned compensation expense of $2.6 million is expected to be recognized over a period of two years.

Note 12. Income Taxes

The provision for income taxes consists of the following for the years ended December 31:

(in thousands)
						2024						2023						2022
Current income tax expense						$	152,939					$	116,877					$	68,415
Deferred income tax expense (benefit)						4,026						(1,002)						9,468
Income tax expense						$	156,965					$	115,875					$	77,883

A reconciliation of the provision for income taxes, with amounts determined by applying the statutory federal income tax rate to pre-tax income, is as follows for the years ended December 31:

(in thousands)
						2024						2023						2022
Income tax at statutory rate						$	159,029					$	118,007					$	79,055
Other, net						(2,064)						(2,132)						(1,172)
Income tax expense						$	156,965					$	115,875					$	77,883

Temporary differences and carry-forwards, which give rise to deferred tax assets and liabilities, are as follows as of December 31:

(in thousands)
						2024						2023
Deferred tax assets:
Other employee benefits						$	18,409					$	17,781
Allowance for management fee returned on cancelled policies						4,647						3,571
Deferred revenue						4,181						3,756
Unrealized losses on investments						3,827						7,164
Current expected credit loss allowance						2,966						2,661
Other						4,617						3,709
Total deferred tax assets						38,647						38,642
Deferred tax liabilities:
Depreciation						27,089						31,126
Pension and other postretirement benefits						12,276						14,738
Prepaid expenses						2,013						2,001
Other						3,687						2,258
Total deferred tax liabilities						45,065						50,123
Net deferred tax liability						$	(6,418)					$	(11,481)

If we determine that any of our deferred tax assets will not result in future tax benefits, a valuation allowance must be established for the portion of the assets that are not expected to be realized. We had no valuation allowance recorded at December 31, 2024 or 2023.

We do not have any unrecognized tax benefit that, if recognized, would affect our effective tax rate as of December 31, 2024 and 2023. Any interest expense related to uncertain tax positions would be recognized in income tax expense.

Tax years ending December 31, 2023, 2022 and 2021 remain open to IRS examination. We are not currently under IRS audit, nor have we been notified of an upcoming IRS audit.

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

Note 13. Capital Stock

Class A and B common stock

We have two classes of common stock: Class A, which has a dividend preference, and Class B, which has voting power and a conversion right. Each share of Class A common stock outstanding at the time of the declaration of any dividend upon shares of Class B common stock shall be entitled to a dividend payable at the same time, at the same record date, and in an amount at least equal to 2/3 of 1.0% of any dividend declared on each share of Class B common stock. We may declare and pay a dividend in respect to Class A common stock without any requirement that any dividend be declared and paid in respect to Class B common stock. Sole shareholder voting power is vested in Class B common stock except insofar as any applicable law shall permit Class A common shareholders to vote as a class in regards to any changes in the rights, preferences, and privileges attaching to Class A common stock. Holders of Class B shares may, at their option, convert their shares into Class A shares at the rate of 2,400 Class A shares per Class B share. There were no shares of Class B common stock converted into Class A common stock in 2024, 2023 or 2022.

Stock repurchases

Our Board of Directors authorized a stock repurchase program effective January 1, 1999 allowing the repurchase of our outstanding Class A nonvoting common stock. In 2011, our Board of Directors approved a continuation of the current stock repurchase program for a total of $150 million, with no time limitation. Treasury shares are recorded in the Consolidated Statements of Financial Position at total cost based upon trade date. There were no shares repurchased under this program during 2024, 2023 or 2022. We had approximately $17.8 million of repurchase authority remaining under this program at December 31, 2024, based upon trade date.

We made stock repurchases in 2024, 2023, and 2022 outside of our publicly announced share repurchase program related to stock-based awards. See Note 11, "Incentive and Deferred Compensation Plans" for additional information.

Note 14. 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 Consolidated Statements of Operations where net income is presented, are as follows for the year ended December 31:

(in thousands)						2024												2023												2022
						Before Tax			Income Tax			Net						Before Tax			Income Tax			Net						Before Tax			Income Tax			Net
Investment securities:
AOCI (loss), beginning of year						$	(31,402)		$	(6,595)		$	(24,807)					$	(66,571)		$	(13,980)		$	(52,591)					$	7,722		$	1,621		$	6,101
OCI (loss) before reclassifications						6,557			1,377			5,180						26,021			5,464			20,557						(89,010)			(18,692)			(70,318)
Realized investment losses						1,620			340			1,280						6,719			1,411			5,308						14,050			2,951			11,099
Impairment losses						783			164			619						2,429			510			1,919						667			140			527
OCI (loss)						8,960			1,881			7,079						35,169			7,385			27,784						(74,293)			(15,601)			(58,692)
AOCI (loss), end of year						$	(22,442)		$	(4,714)		$	(17,728)					$	(31,402)		$	(6,595)		$	(24,807)					$	(66,571)		$	(13,980)		$	(52,591)
Pension and other postretirement plans:
AOCI (loss), beginning of year						$	14,439		$	3,032		$	11,407					$	57,186		$	12,009		$	45,177					$	(39,734)		$	(8,345)		$	(31,389)
OCI (loss) before reclassifications						(45,655)			(9,588)			(36,067)						(28,862)			(6,061)			(22,801)						88,148			18,511			69,637
Amortization of prior service costs (1)						1,611			338			1,273						1,446			304			1,142						1,443			303			1,140
Amortization of net actuarial (gain) loss (1)						(6,859)			(1,440)			(5,419)						(15,331)			(3,220)			(12,111)						7,329			1,540			5,789
Settlement gain (1)						(1,338)			(281)			(1,057)						—			—			—						—			—			—
OCI (loss)						(52,241)			(10,971)			(41,270)						(42,747)			(8,977)			(33,770)						96,920			20,354			76,566
AOCI (loss), end of year						$	(37,802)		$	(7,939)		$	(29,863)					$	14,439		$	3,032		$	11,407					$	57,186		$	12,009		$	45,177
Total
AOCI (loss), beginning of year						$	(16,963)		$	(3,563)		$	(13,400)					$	(9,385)		$	(1,971)		$	(7,414)					$	(32,012)		$	(6,724)		$	(25,288)
Investment securities						8,960			1,881			7,079						35,169			7,385			27,784						(74,293)			(15,601)			(58,692)
Pension and other postretirement plans						(52,241)			(10,971)			(41,270)						(42,747)			(8,977)			(33,770)						96,920			20,354			76,566
OCI (loss)						(43,281)			(9,090)			(34,191)						(7,578)			(1,592)			(5,986)						22,627			4,753			17,874
AOCI (loss), end of year						$	(60,244)		$	(12,653)		$	(47,591)					$	(16,963)		$	(3,563)		$	(13,400)					$	(9,385)		$	(1,971)		$	(7,414)

*(1)*These components of AOCI (loss) are included in the computation of net periodic pension (income) cost. See Note 10, "Postretirement Benefits", for additional information.

Note 15. Related Party

Management fee

A management fee is retained for services we provide under the subscriber's agreement with subscribers at the Exchange. The fee is a percentage of direct and affiliated assumed premiums written by the Exchange. This percentage rate is determined at least annually by our Board of Directors but cannot exceed 25%. The management fee rate charged the Exchange was 25% in 2024, 2023 and 2022. The Board of Directors elected to maintain the fee at 25% beginning January 1, 2025.

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

Insurance holding company system

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

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

Shared facilities

The Exchange and its insurance subsidiaries have a service agreement with Indemnity to use space in Indemnity-owned properties. The amount charged is based on rental rates of like property in Erie, Pennsylvania and the square footage occupied. Income earned from the Exchange and its insurance subsidiaries for the use of space totaled $2.9 million, $2.6 million and $2.2 million in 2024, 2023, and 2022, respectively. Operating expenses for Indemnity-owned properties under this service agreement include utilities, cleaning, repairs, real estate taxes, property insurance, and leasehold improvements. These expenses totaled $21.9 million, $20.0 million, and $19.5 million in 2024, 2023, and 2022, respectively. The Exchange and its insurance subsidiaries reimbursed us for operating expenses of shared facilities used to perform administrative services, which are allocated based upon square footage occupied. Reimbursements related to the use of this space totaled $5.9 million, $5.2 million, and $4.1 million in 2024, 2023, and 2022, respectively.

Other loans receivable

In 2023, we issued two senior secured loans totaling $13.6 million to fund a real estate development project supporting revitalization efforts in our community. Ownership in the project consists of related party investors, including affiliate entities and two Indemnity directors, as well as other unrelated investors. The loans, net of current expected credit loss allowances totaling $8.0 million and $7.3 million as of December 31, 2024 and 2023, respectively, are reported in "Other assets, net" in our Consolidated Statements of Financial Position, with changes in credit loss allowances reported in "Net impairment losses recognized in earnings" in our Consolidated Statements of Operations.

The first loan issued for $4.6 million accrues paid-in-kind interest at a fixed rate of 5% and matures December 15, 2027, with both principal and accrued interest due at maturity. The second loan issued for $9.0 million accrues paid-in-kind interest at a fixed rate of 5% and matures December 15, 2033, with both principal and accrued interest due at maturity.

Note 16. 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 $707.1 million and $625.3 million at December 31, 2024 and 2023, respectively, which includes a current expected credit loss allowance of $0.7 million and $0.6 million in 2024 and 2023, respectively.

Note 17. 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 $150 million. We have committed to fund a minimum of 30% of each loan executed through this program. As of December 31, 2024, outstanding loans executed under this agreement totaled $110.3 million, of which our portion of the loans is $41.5 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 December 31, 2024, our maximum potential amount of future payments on the guaranteed portion is $13.2 million. All loan payments under the participation program are current as of December 31, 2024.

We also have contingent obligations for guarantees related to certain real estate development projects supporting revitalization efforts in our community. As of December 31, 2024, our maximum potential obligation related to the guarantees is $10.5 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 consolidated 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 consolidated 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 consolidated financial condition, results of operations, or cash flows.

Note 18. Supplementary Data on Cash Flows

A reconciliation of net income to net cash provided by operating activities as presented in the Consolidated Statements of Cash Flows is as follows for the years ended December 31:

(in thousands)						2024						2023						2022
Cash flows from operating activities:
Net income						$	600,314					$	446,061					$	298,569
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization						56,530						47,415						46,166
Deferred income tax expense (benefit)						4,026						(1,002)						9,468
Lease amortization expense						7,377						6,177						5,554
Losses (gains) and impairment losses on investments						895						15,604						27,953
Loss on disposal of fixed assets						3,874						1,607						172
Net investment (income) loss						(874)						13,772						12,916
Increase (decrease) in deferred compensation						2,677						6,143						(1,463)
Increase in receivables from affiliates						(81,722)						(100,401)						(45,814)
Increase in accrued investment income						(1,611)						(1,157)						(1,998)
Increase in pension asset						(34,516)						(101,250)						—
Increase in pension liability						—						—						15,647
(Increase) decrease in prepaid expenses and other assets						(2,996)						7,729						(25,843)
(Decrease) increase in accounts payable and accrued expenses						(7,517)						7,237						18,993
Increase in commissions payable						54,600						53,681						29,282
Increase (decrease) in accrued agent incentive compensation						7,381						(27,089)						(25,271)
Increase in contract liability						2,811						6,678						1,821
Net cash provided by operating activities						$	611,249					$	381,205					$	366,152

Note 19. Subsequent Events

No items were identified in this period subsequent to the financial statement date that required adjustment or additional disclosure, other than the disclosure made in Note 10, "Postretirement Benefits" regarding the January 2025 pension contribution.