Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS


			Page Number
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)			38
Consolidated Statements of Operations for the Years Ended December 31, 202 5 , 202 4 and 20 2 3			40
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 202 5 , 202 4 and 202 3			41
Consolidated Statements of Financial Position - December 31, 202 5 and 20 2 4			42
Consolidated Statements of Shareholders' Equity for the Years ended December 31, 202 5 , 202 4 and 202 3			43
Consolidated Statements of Cash Flows for the Years ended December 31, 202 5 , 202 4 and 202 3			44
Notes to Consolidated Financial Statements - December 31, 202 5			45

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, 2025 and 2024, 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, 2025, 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, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, 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, 2025, 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 23, 2026 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, 2025, the Company’s cost of operations – administrative services totaled $836.6 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, and investment management services 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 relevant utilization statistics. 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 23, 2026

ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

Years ended December 31, 2025, 2024 and 2023

(dollars in thousands, except per share data)


	2025		2024		2023
Operating revenue
Management fee revenue - policy issuance and renewal services	$	3,131,806	$	2,894,074	$	2,442,073
Management fee revenue - administrative services	74,058		68,355		63,669
Administrative services reimbursement revenue	836,639		806,336		737,139
Service agreement revenue	24,755		26,350		26,059
Total operating revenue	4,067,258		3,795,115		3,268,940

Operating expenses
Cost of operations - policy issuance and renewal services	2,513,435		2,312,324		2,011,545
Cost of operations - administrative services	836,639		806,336		737,139
Total operating expenses	3,350,074		3,118,660		2,748,684
Operating income	717,184		676,455		520,256

Investment income
Net investment income	85,837		70,155		44,572
Net realized and unrealized investment gains (losses)	2,336		3,229		(5,838)
Net impairment losses recognized in earnings	(3,312)		(4,124)		(9,766)

Total investment income	84,861		69,260		28,968


Other income	8,558		11,564		12,712
Contribution to charitable foundation	(100,000)		—		—
Income before income taxes	710,603		757,279		561,936
Income tax expense	151,268		156,965		115,875
Net income	$	559,335	$	600,314	$	446,061


Earnings Per Share
Net income per share
Class A common stock – basic	$	12.01	$	12.89	$	9.58
Class A common stock – diluted	$	10.69	$	11.48	$	8.53
Class B common stock – basic	$	1,802	$	1,934	$	1,437
Class B common stock – diluted	$	1,801	$	1,933	$	1,437

Weighted average shares outstanding – Basic
Class A common stock	46,189,024		46,189,044		46,188,981
Class B common stock	2,542		2,542		2,542

Weighted average shares outstanding – Diluted
Class A common stock	52,305,424		52,306,266		52,299,411
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, 2025, 2024 and 2023

(in thousands)


	2025		2024		2023
Net income	$	559,335	$	600,314	$	446,061

Other comprehensive loss, net of tax
Change in unrealized holding gains on available-for-sale securities	18,920		7,079		27,784
Pension and other postretirement plans	(23,350)		(41,270)		(33,770)
Total other comprehensive loss, net of tax	(4,430)		(34,191)		(5,986)

Comprehensive income	$	554,905	$	566,123	$	440,075

ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

At December 31, 2025 and 2024

(dollars in thousands, except per share data)


	2025		2024
Assets
Current assets:
Cash and cash equivalents (includes restricted cash of $30,189 and $23,559, respectively)	$	345,874	$	298,397
Available-for-sale securities	33,902		44,604

Available-for-sale securities lent	3,436		0
Receivables from Erie Insurance Exchange and affiliates, net	735,589		707,060
Prepaid expenses and other current assets, net	66,061		83,902



Accrued investment income	14,311		11,069
Total current assets	1,199,173		1,145,032

Available-for-sale securities, net	1,286,566		991,726
Equity securities	70,624		85,891
Available-for-sale and equity securities lent	61,063		7,285

Fixed assets, net	571,476		513,494
Agent loans, net	93,953		80,597

Defined benefit pension plan	24,137		21,311
Other assets, net	48,489		43,278
Total assets	$	3,355,481	$	2,888,614

Liabilities and shareholders' equity
Current liabilities:
Commissions payable	$	425,320	$	408,309
Agent incentive compensation	132,560		75,458
Accounts payable and accrued liabilities	200,701		190,028
Dividends payable	68,109		63,569
Contract liability	47,561		42,761
Deferred executive compensation	9,400		14,874
Securities lending payable	61,936		7,513

Total current liabilities	945,587		802,512

Defined benefit pension plan	33,410		28,070

Contract liability	23,274		21,170
Deferred executive compensation	22,050		19,721
Deferred income taxes, net	24,788		6,418
Other long-term liabilities	22,998		23,465
Total liabilities	1,072,107		901,356

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	16,492		16,466
Accumulated other comprehensive loss	(52,021)		(47,591)
Retained earnings	3,462,823		3,162,303
Total contributed capital and retained earnings	3,429,464		3,133,348
Treasury stock, at cost; 22,110,132 shares held	(1,171,014)		(1,169,074)
Deferred compensation	24,924		22,984
Total shareholders' equity	2,283,374		1,987,258
Total liabilities and shareholders' equity	$	3,355,481	$	2,888,614

See accompanying notes to Consolidated Financial Statements.

ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Years ended December 31, 2025, 2024 and 2023

(dollars in thousands, except per share data)


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

Net income									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
Net income									559,335						559,335
Other comprehensive loss							(4,430)								(4,430)
Dividends declared:
Class A $5.5575 per share									(256,696)						(256,696)
Class B $833.625 per share									(2,119)						(2,119)
Net purchase of treasury stock (1)					26										26
Deferred compensation											(2,514)		2,514		0
Rabbi trust distribution (2)											574		(574)		0

Balance, December 31, 2025	$	1,992	$	178	$	16,492	$	(52,021)	$	3,462,823	$	(1,171,014)	$	24,924	$	2,283,374

(1) Net purchases of treasury stock in 2023, 2024 and 2025 include the purchase 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 five incentive compensation deferral plan participants in both 2023 and 2024 and three incentive compensation plan deferral participants in 2025. 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, 2025, 2024 and 2023

(in thousands)


	2025		2024		2023
Cash flows from operating activities
Management fee received	$	3,209,511	$	2,898,367	$	2,420,192
Administrative services reimbursements received	814,106		776,150		721,928
Service agreement revenue received	24,751		26,346		26,018
Net investment income received	78,699		67,643		57,448


Commissions paid to agents	(1,608,605)		(1,443,296)		(1,200,014)
Incentive compensation paid to agents	(94,794)		(94,864)		(120,211)
Salaries and wages paid	(264,406)		(249,137)		(226,036)
Pension contribution and employee benefits paid	(115,260)		(110,764)		(169,762)
General operating expenses paid	(316,643)		(308,273)		(293,857)
Administrative services expenses paid	(836,702)		(791,050)		(730,129)
Contribution to charitable foundation	(100,000)		—		—
Income taxes paid	(104,000)		(159,873)		(104,372)

Net cash provided by operating activities	686,657		611,249		381,205

Cash flows from investing activities
Purchase of investments:
Available-for-sale securities	(693,066)		(473,647)		(279,999)
Equity securities	(36,926)		(32,799)		(35,480)

Other investments	(50)		(7,075)		(88)
Proceeds from investments:
Available-for-sale securities sales	205,965		205,159		160,614
Available-for-sale securities maturities/calls	188,569		196,641		76,617
Equity securities	34,339		35,894		24,458

Other investments	167		54		871
Purchase of fixed assets	(115,692)		(124,845)		(92,647)

Loans to agents and others	(35,505)		(36,362)		(20,525)
Collections on agent and other loans	12,871		10,068		8,614

Net cash used in investing activities	(439,328)		(226,912)		(157,565)

Cash flows from financing activities

Dividends paid to shareholders	(254,275)		(237,508)		(221,675)

Net changes in cash collateral for securities lent	54,423		7,513		—



Net cash used in financing activities	(199,852)		(229,995)		(221,675)

Net increase in cash, cash equivalents and restricted cash	47,477		154,342		1,965
Cash, cash equivalents and restricted cash, beginning of year	298,397		144,055		142,090
Cash, cash equivalents and restricted cash, end of year	$	345,874	$	298,397	$	144,055

Supplemental disclosure of noncash transactions
Liability incurred to purchase fixed assets	$	26,361	$	15,254	$	—
Operating lease assets obtained in exchange for lease liabilities	$	4,000	$	7,871	$	5,866
Receipt of donated equipment	$	1,967	$	—	$	—

See accompanying notes to Consolidated Financial Statements. See Note 12, "Income Taxes", for additional information on income taxes paid. 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 71% of our 2025 policy issuance and renewal expenses. The underwriting services we provide include underwriting and policy processing and comprised approximately 8% of our 2025 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 10% of our 2025 policy issuance and renewal expenses. Included in these expenses are allocations of costs for departments that support these policy issuance and renewal functions.

Our results of operations are tied to the growth and financial condition of the Exchange. We continually monitor the financial strength 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 a significant downgrade in 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 fee revenue 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") 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures", effective with the annual reporting period ending December 31, 2025. We applied the guidance retrospectively to prior periods presented in the consolidated financial statements for disclosure purposes, including the disclosure of specific categories in an effective tax rate reconciliation and certain information about income taxes paid. The additional disclosures required by this guidance have been included in Note 12, "Income Taxes". The adoption of this guidance had no other impact on our consolidated financial statements.

Recently issued accounting standards

In November 2024, the Financial Accounting Standards Board ("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.

In July 2025, the FASB issued ASU 2025-05, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets", which provides a practical expedient when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under "Revenue from Contracts with Customers (Topic 606)". Under the practical expedient, entities may assume that current conditions as of the balance sheet date do not change for the remaining life of the asset. The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years. Early adoption is permitted. An entity that elects the practical expedient should apply the amendments on a prospective basis. We do not expect the standard will have a material impact on our consolidated financial statements and disclosures.

In September 2025, the FASB issued ASU 2025-06, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software", which removes all references to prescriptive and sequential software development project stages and requires an entity to start capitalizing software costs when management has authorized and committed to funding the software project and it is probable that the project will be completed and the software will be used to perform the function intended. The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years. Early adoption is permitted. The amendments can be applied on a prospective, modified or retrospective basis. We are currently evaluating the impact of adoption on our consolidated financial statements and disclosures.

In December 2025, the FASB issued ASU 2025-11 "Interim Reporting (Topic 270) - Narrow-Scope Improvements", which clarifies current interim disclosure requirements and provides a comprehensive list of required interim disclosures. The guidance also incorporates a disclosure principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. The amendments in this ASU are required to be adopted for interim reporting periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments can be applied on a prospective or retrospective basis. We do not expect the standard will have a material impact on our disclosures, and will have no other impact on our consolidated financial statements.

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 – We have 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, including available-for-sale and equity securities, are carried as invested assets on our Consolidated Statements 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 Statements 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 internal-use 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 remaining 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 3-7 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 2025, approximately 71% of the administrative services expenses were entirely attributable to the respective administrative functions (claims handling, life insurance management, and investment management), while the remaining 29% of these expenses were allocations of costs for departments that support these administrative functions. The expenses we incur and related reimbursements we receive for administrative services are presented gross in our 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.

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)	2025		2024		2023
Management fee revenue - policy issuance and renewal services	$	3,131,806	$	2,894,074	$	2,442,073

Management fee revenue - administrative services	74,058		68,355		63,669
Administrative services reimbursement revenue	836,639		806,336		737,139
Total revenue from administrative services	$	910,697	$	874,691	$	800,808

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)	2025		2024		2023
Management fee revenue	$	3,205,864	$	2,962,429	$	2,505,742
Administrative services reimbursement revenue	836,639		806,336		737,139
Service agreement revenue	24,755		26,350		26,059
Total operating revenue	4,067,258		3,795,115		3,268,940

Commissions	1,777,043		1,601,401		1,348,530
Underwriting and policy processing	204,245		199,485		181,003
Information technology	239,789		215,488		216,746
Sales and advertising	66,475		66,480		58,905
Customer service	46,538		43,045		34,391
Administrative and other	179,345		186,425		171,970
Cost of operations - policy issuance and renewal services	2,513,435		2,312,324		2,011,545
Cost of operations - administrative services	836,639		806,336		737,139
Total operating expenses (1)	3,350,074		3,118,660		2,748,684
Operating income	717,184		676,455		520,256

Total investment income	84,861		69,260		28,968

Other income	8,558		11,564		12,712
Contribution to charitable foundation	(100,000)		—		—
Income tax expense	151,268		156,965		115,875
Net income	$	559,335	$	600,314	$	446,061

(1) See Note 8, "Fixed Assets", for management operations segment depreciation and amortization expense included primarily 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,
	2025					2024					2023
	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	$	554,755	46,189,024	$	12.01	$	595,399	46,189,044	$	12.89	$	442,409	46,188,981	$	9.58
Dilutive effect of stock-based awards	0		15,600	—		0		16,422	—		0		9,630	—
Assumed conversion of Class B shares	4,580		6,100,800	—		4,915		6,100,800	—		3,652		6,100,800	—
Class A – Diluted EPS:
Income available to Class A stockholders on Class A equivalent shares	$	559,335	52,305,424	$	10.69	$	600,314	52,306,266	$	11.48	$	446,061	52,299,411	$	8.53
Class B – Basic EPS:
Income available to Class B stockholders	$	4,580	2,542	$	1,802	$	4,915	2,542	$	1,934	$	3,652	2,542	$	1,437
Class B – Diluted EPS:
Income available to Class B stockholders	$	4,579	2,542	$	1,801	$	4,914	2,542	$	1,933	$	3,652	2,542	$	1,437

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, 2025, 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, 2025

(in thousands)	Total		Level 1		Level 2		Level 3

Available-for-sale securities:



Corporate debt securities	$	844,479	$	998	$	839,542	$	3,939
Collateralized debt obligations	133,267		0		133,267		0
Commercial mortgage-backed securities	140,541		0		117,520		23,021
Residential mortgage-backed securities	187,226		0		186,432		794
Other debt securities	35,152		0		35,152		0
U.S. Treasury	24,163		0		24,163		0
Total available-for-sale securities (1)	1,364,828		998		1,336,076		27,754
Equity securities:
Financial services sector	74,614		2,593		66,350		5,671
Utilities sector	3,696		0		3,696		0
Energy sector	2,713		0		2,713		0
Consumer sector	5,563		0		2,393		3,170
Technology sector	3,224		0		0		3,224

Communications sector	953		0		953		0
Total equity securities (2)	90,763		2,593		76,105		12,065
Total	$	1,455,591	$	3,591	$	1,412,181	$	39,819

(1) This includes $44.4 million of securities lent under a securities lending agreement.

(2) This includes $20.1 million of securities lent under a securities lending agreement.



	December 31, 2024

(in thousands)	Total		Level 1		Level 2		Level 3

Available-for-sale securities:



Corporate debt securities	$	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)	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.

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 – 2025 Year-to-Date Change:



(in thousands)	Beginning balance at December 31, 2024		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, 2025
Available-for-sale securities:



Corporate debt securities	$	6,268	$	(37)	$	(48)	$	4,773	$	(2,324)	$	5,399	$	(10,092)	$	3,939
Collateralized debt obligations	0		(4)		0		700		(696)		0		0		0
Commercial mortgage-backed securities	24,089		(1,089)		429		4,769		(3,142)		26,476		(28,511)		23,021
Residential mortgage-backed securities	0		0		13		0		(42)		2,207		(1,384)		794

Total available-for-sale securities	30,357		(1,130)		394		10,242		(6,204)		34,082		(39,987)		27,754
Equity securities	6,974		681		—		4,750		0		158		(498)		12,065
Total Level 3 securities	$	37,331	$	(449)	$	394	$	14,992	$	(6,204)	$	34,240	$	(40,485)	$	39,819

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

(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, 2025				December 31, 2024
(in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value

Agent loans, net (1)	$	109,331	$	113,850	$	92,731	$	90,713
Other loans receivable, net (2)	15,491		12,509		11,555		11,555
Held-to-maturity securities, net (3)	4,833		4,863		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, 2025
(in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Available-for-sale securities:



Corporate debt securities	$	834,885	$	12,779	$	3,185	$	844,479
Collateralized debt obligations	133,224		207		164		133,267
Commercial mortgage-backed securities	139,516		2,808		1,783		140,541
Residential mortgage-backed securities	196,624		982		10,380		187,226
Other debt securities	34,863		543		254		35,152
U.S. Treasury	24,116		106		59		24,163
Total available-for-sale securities, net (1)	1,363,228		17,425		15,825		1,364,828
Held-to-maturity securities - states & political subdivisions	4,833		30		0		4,863
Total fixed maturity securities, net	$	1,368,061	$	17,455	$	15,825	$	1,369,691

(1) This includes an estimated fair value of $44.4 million of securities lent under a securities lending agreement.



	December 31, 2024
(in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Available-for-sale securities:



Corporate debt securities	$	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)	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.

The amortized cost and estimated fair value of our fixed maturity securities at December 31, 2025 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, 2025
	Amortized		Estimated
(in thousands)	cost		fair value
Available-for-sale securities:
Due in one year or less	$	37,273	$	37,302
Due after one year through five years	552,240		558,399
Due after five years through ten years	249,274		251,231
Due after ten years	524,441		517,896
Total available-for-sale securities, net (1) (2)	1,363,228		1,364,828
Held-to-maturity securities - due after ten years	4,833		4,863
Total fixed maturity securities, net	$	1,368,061	$	1,369,691

(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, 2025.

(2) This includes an estimated fair value of $44.4 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, 2025
	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	$	72,699	$	1,555	$	41,040	$	1,630	$	113,739	$	3,185	418
Collateralized debt obligations	57,917		120		3,909		44		61,826		164		83
Commercial mortgage-backed securities	16,103		59		19,956		1,724		36,059		1,783		70
Residential mortgage-backed securities	17,675		27		92,019		10,353		109,694		10,380		146
Other debt securities	3,936		39		3,655		215		7,591		254		27
U.S. Treasury	13,296		59		0		0		13,296		59		3
Total available-for-sale securities	$	181,626	$	1,859	$	160,579	$	13,966	$	342,205	$	15,825	747
Quality breakdown of available-for-sale securities:
Investment grade	$	144,472	$	433	$	144,604	$	12,773	$	289,076	$	13,206	371
Non-investment grade	37,154		1,426		15,975		1,193		53,129		2,619		376
Total available-for-sale securities	$	181,626	$	1,859	$	160,579	$	13,966	$	342,205	$	15,825	747



	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

Credit loss allowances

The following tables present a roll-forward of the allowances for credit losses on investments for the years ended December 31:


	2025
(in thousands)	Available-for-sale securities		Held-to-maturity securities		Other loans receivable		Agent loans
Balance, beginning of period	$	513	$	2,167	$	12,198	$	1,312
Provision and recoveries	1,389		0		2,928		368
Sales/collections and write-offs	(1,000)		0		(25)		0
Balance, end of period	$	902	$	2,167	$	15,101	$	1,680


	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

Net investment income

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




(in thousands)	2025		2024		2023

Available-for-sale securities	$	57,093	$	49,605	$	42,563
Equity securities	4,637		4,758		4,493
Limited partnerships (1)	3,549		1,971		(11,308)
Agent loans (2)	6,417		4,368		3,236
Cash equivalents and other (2)	16,551		11,093		5,943
Total investment income	88,247		71,795		44,927
Less: investment expenses	2,410		1,640		355
Net investment income	$	85,837	$	70,155	$	44,572

(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.

(2) 2024 and 2023 amounts have been reclassified to conform to the current period presentation.

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)	2025		2024		2023
Available-for-sale securities:

Gross realized gains	$	2,891	$	3,415	$	804
Gross realized losses	(2,838)		(5,035)		(7,523)
Net realized gains (losses) on available-for-sale securities	53		(1,620)		(6,719)



Equity securities	2,278		4,848		871









Miscellaneous	5		1		10




Net realized and unrealized investment gains (losses)	$	2,336	$	3,229	$	(5,838)

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)	2025		2024		2023
Equity securities:
Net gains recognized during the period	$	2,278	$	4,848	$	871
Less: net gains (losses) recognized on securities sold	341		1,213		(2,328)
Net unrealized gains recognized on securities held at reporting date	$	1,937	$	3,635	$	3,199

Net impairment losses recognized in earnings

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



(in thousands)	2025		2024		2023
Available-for-sale securities:
Intent to sell	$	(495)	$	(299)	$	(1,759)
Credit impaired	(1,389)		(484)		(670)
Total available-for-sale securities	(1,884)		(783)		(2,429)
Expected credit losses:

Held-to-maturity securities	0		(2,167)		—
Agent loans	(368)		(355)		0
Other loans receivable	(1,060)		(819)		(7,337)
Net impairment losses recognized in earnings	$	(3,312)	$	(4,124)	$	(9,766)

Securities lending transactions

As of December 31, 2025, the estimated fair value of loaned securities was $64.5 million, consisting of $44.4 million of available-for sale securities and $20.1 million of equity securities. As of December 31, 2024, the estimated fair value of loaned securities was $7.3 million, consisting of available-for-sale securities. Cash collateral received in connection with these securities lending transactions totaled $61.9 million and $7.5 million as of December 31, 2025 and 2024, respectively. The cash collateral was reinvested in cash equivalents and is included in "Cash and cash equivalents" in the Consolidated Statements of Financial Position. As of December 31, 2025, we also received $4.5 million of non-cash collateral, which we are not permitted to sell or repledge. There were no securities lending transactions outstanding with contractual maturities extending 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)	2025		2024
Software	$	412,789	$	351,814
Land, buildings, and building improvements	235,915		233,647
Equipment	57,968		52,122
Furniture and fixtures	22,944		22,944
Leasehold improvements	1,654		1,378
Construction in progress	78,148		46,302
Projects in progress	77,955		81,616
Total fixed assets, gross	887,373		789,823
Less: Accumulated depreciation and amortization	(315,897)		(276,329)
Fixed assets, net	$	571,476	$	513,494

Software increased primarily due to internal-use software projects that were completed and placed in service as well as the renewal of mainframe software licenses.

Construction in progress includes ongoing renovations to office buildings that are part of our principal headquarters and not yet subject to depreciation. The renovations are expected to be completed in phases 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 $69.5 million, $56.5 million and $47.4 million for the years ended December 31, 2025, 2024 and 2023, respectively, and is primarily included in total operating expenses. The Exchange and its insurance subsidiaries reimbursed us for approximately 31%, 28% and 27% in 2025, 2024 and 2023, 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, 2025, 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, 2025. Investments with a fair value of $111.4 million were pledged as collateral on the line of credit at December 31, 2025. 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, 2025. The bank requires compliance with certain covenants, which include leverage ratios and debt restrictions. We are in compliance with all covenants at December 31, 2025.

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 cost or income. These reimbursements represent pension benefits for employees performing administrative services and an allocated share of plan cost (income) for employees in departments that support the administrative functions. In 2025, the Exchange and its insurance subsidiaries reimbursed us for approximately 61% of the annual defined benefit pension cost and 33% of the annual SERP cost. For our funded pension plan, amounts are settled in cash for the portion of pension cost (income) 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 cost (income)

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


(in thousands)
	2025		2024		2023
Service cost for benefits earned	$	35,471	$	34,554	$	28,763
Interest cost on benefit obligation	58,748		52,688		50,193
Expected return on plan assets	(80,276)		(80,793)		(68,869)
Prior service cost amortization	1,688		1,611		1,446
Net actuarial gain amortization	(2,519)		(6,859)		(15,331)
Settlement gain (1)	(572)		(1,338)		—
Pension plan cost (income) (2)	$	12,540	$	(137)	$	(3,798)

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

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

Actuarial assumptions

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


	2025		2024

Employee pension plan:
Discount rate	5.72	%	5.87	%
Expected return on assets	7.00		7.00
Rate of compensation increase – age-graded	5.07		5.01

SERP:
Discount rate	5.44	%	5.65	%
Rate of compensation increase	7.00		7.00

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


	2025		2024		2023

Employee pension plan:
Discount rate	5.87	%	5.34	%	5.67	%
Expected return on assets	7.00		7.00		6.50
Rate of compensation increase – age-graded	5.05		4.31		3.30

SERP:
Discount rate (1)	5.29	%	5.12	%	5.46	%
Rate of compensation increase	7.00		5.00		5.00

(1) Settlement accounting was required due to lump sum payments made under the SERP in 2025 and 2024. The 2025 discount rates in effect at the January 1, September 1, and November 1 measurement dates were 5.65%, 5.51%, and 5.29%, respectively. The 2024 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 contributions of $39 million and $33 million in 2025 and 2024, respectively. We also made a contribution of $47 million in January 2026. The pension asset is presented separately from the unfunded SERP 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)
	2025		2024

Funded status at end of year	$	(11,484)	$	(11,718)

Pension asset	$	24,137	$	21,311
Pension liabilities – due within one year (1)	(2,211)		(4,959)
Pension liabilities – due after one year	(33,410)		(28,070)
Net amount recognized	$	(11,484)	$	(11,718)

(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)
	2025		2024
Projected benefit obligation, beginning of year	$	1,013,767	$	993,554
Service cost for benefits earned	35,471		34,554
Interest cost on benefit obligation	58,748		52,688
Plan amendments	1,935		1,146
Actuarial loss (gain)	36,300		(28,250)
Benefits paid	(39,887)		(35,924)
Settlements	(3,252)		(4,001)
Projected benefit obligation, end of year	$	1,103,082	$	1,013,767

Accumulated benefit obligation, end of year	$	935,049	$	860,855

Projected benefit obligations increased $89.3 million at December 31, 2025 compared to December 31, 2024 primarily due to the lower discount rate used to measure the future benefit obligations. The discount rate for the employee pension plan decreased to 5.72% in 2025 from 5.87% in 2024.

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


(in thousands)
	2025		2024
Projected benefit obligation	$	35,621	$	33,029

Plan assets	—		—

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


(in thousands)
	2025		2024

Accumulated benefit obligation	$	23,523	$	22,761
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)
	2025		2024
Fair value of plan assets, beginning of year	$	1,002,049	$	996,879
Actual return on plan assets	90,357		8,034
Employer contributions	42,331		37,061
Benefits paid	(39,887)		(35,924)
Settlements	(3,252)		(4,001)
Fair value of plan assets, end of year	$	1,091,598	$	1,002,049

Accumulated other comprehensive loss

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


(in thousands)
	2025		2024
Net actuarial loss	$	56,062	$	26,752
Prior service cost	11,297		11,050
Net amount not yet recognized	$	67,359	$	37,802

Other comprehensive loss

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


(in thousands)
	2025		2024		2023
Net actuarial loss arising during the year	$	26,219	$	44,509	$	28,279
Amortization of net actuarial gain	2,519		6,859		15,331
Amortization of prior service cost	(1,688)		(1,611)		(1,446)
Plan amendments (1)	1,935		1,146		583
Settlement gain	572		1,338		—
Total recognized in other comprehensive loss	$	29,557	$	52,241	$	42,747

(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		Target asset allocation		Actual asset allocation			Actual asset allocation
Asset allocation:	2025		2024		2025			2024
Equity securities:
U.S. equity securities	21	%	21	%	22	%	(1)	21	%
Non-U.S. equity securities	14		14		15		(2)	14
Total equity securities	35		35		37			35
Debt securities	64		64		62		(3)	63
Other	1		1		1		(4)	2
Total	100	%	100	%	100	%		100	%

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

(2) Non-U.S. equity securities – 11% are allocated to international small cap investments, while another 21% are allocated to international emerging market investments. The remaining 68% of the Non-U.S. equity securities are allocated to investments seeking to achieve excess returns relative to an international market index.

(3) 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.

(4) 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, 2025

(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	$	235,431	$	224,370	$	0	$	0	$	11,061
Non-U.S. equity securities	160,644		108,651		0		0		51,993
Total equity securities	396,075		333,021		0		0		63,054
Debt securities	679,966		0		0		0		679,966
Other	15,557		15,557		0		0		0
Total	$	1,091,598	$	348,578	$	0	$	0	$	743,020



	December 31, 2024

(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	$	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

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
2026	$	44,346
2027		47,555
2028		51,396
2029		54,999
2030		59,093
2031 - 2035		346,104

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 $21.3 million in 2025, $21.0 million in 2024, and $18.4 million in 2023. 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, 2025 and 2024.

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. Participants can elect to defer up to 100% of the award under the incentive compensation deferral plan.

The LTIP permits grants of performance-vesting and time-vesting awards. Performance-vesting awards can take the form of performance shares or units, or phantom performance shares, based on the level of achievement of performance goals as defined by us. Time-vesting awards can take the form of 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. Performance measures and a peer group of property and casualty companies to be used for comparison are determined by the ECDC for performance-vesting awards. The performance measures for all periods presented were the reported growth in direct written premium, statutory combined ratio, and return on invested assets of the Exchange and its property and casualty subsidiaries 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. 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. For the 2023-2025 performance period, the LTIP plan provides grants of performance-vesting awards. For the 2024-2026 and 2025-2027 performance periods, the LTIP plans provide grants of both a 75% performance-vesting award and a 25% time-vesting award. The plan awards for all three performance periods will be paid in cash.

The number of shares of our common stock authorized for grant under the LTIP is 1.5 million shares. We do not issue new shares of common stock to settle stock awards. We purchase our Class A common stock on the open market to settle stock awards under the plan. LTIP awards are considered vested at the end of each applicable performance period. The fair value of LTIP awards granting shares is measured at each reporting date at the current share price of our Class A common stock, and the fair value of LTIP awards granting units is measured at each reporting date based on the number of units earned. A liability is recorded and compensation expense is recognized ratably over the performance period.

The following table presents the fully vested plan awards for the related performance periods at December 31: (1)


(dollars in thousands)	2025 (2)		2024		2023		2022
LTIP performance period	2023-2025		2022-2024		2021-2023		2020-2022
Fully vested plan award fair value	$	2,631	$	4,902	$	249	$	3,801

(1) Distributions to participants are made in June of the year following the close of the performance period.

(2) The 2025 award is estimated based upon the peer group information as of September 30, 2025. Distributions will be made in 2026 once peer group financial information becomes available.

The following table presents the total compensation cost charged to operations related to the LTIP awards, net of forfeitures, and the related tax benefits recognized in income, for the years ended December 31:


(in thousands)	2025		2024		2023
Total compensation cost	$	663	$	1,542	$	7,332
Tax benefit	$	139	$	324	$	1,540

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 Exchange and its insurance subsidiaries reimbursed us for approximately 36%, 39%, and 35% of the awards paid under these plans in 2025, 2024, and 2023, respectively. At December 31, 2025, there was $7.9 million of total unrecognized compensation cost for non-vested LTIP awards related to open performance periods, which 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. We do not issue new shares of common stock to participants. We purchase shares of our Class A common stock in the open market to satisfy these awards. 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. Tax withholdings on rabbi trust distributions are paid from funds outside the trust. As a result, shares withheld from distributions to satisfy those withholdings reduce the number of shares that must be purchased in the future to fund the rabbi trust for both plans. 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.

The following table presents amounts related to shares purchased by the rabbi trust to satisfy the liability of awards deferred under the plan, and dividend equivalent credits on rabbi trust shares, for the years ended December 31:


(dollars in thousands, except per share data)	2025		2024		2023
LTIP performance period	2022-2024		2021-2023		2020-2022
AIP performance period	2024		2023		2022
Shares purchased	0		0		1,608
Average price paid per share	$	0.00	$	0.00	$	230.71
Cost of shares purchased	$	0	$	0	$	371

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 purchase 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 shares are distributed to the outside director from the rabbi trust upon ending board service.

The following table presents amounts related to shares purchased by the rabbi trust to satisfy the liability of the plan and dividend equivalent credits on rabbi trust shares, and the total compensation cost charged to operations, for the years ended December 31:


(dollars in thousands, except per share data)	2025		2024		2023
Shares purchased	77		4,044		5,894
Average price paid per share	$	283.14	$	405.60	$	238.73
Cost of shares purchased	$	22	$	1,640	$	1,407
Total compensation cost	$	547	$	1,052	$	893

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


(in thousands)
	2025		2024		2023

Deferred executive compensation, beginning of the year	$	34,595	$	31,918	$	25,760
Annual incentive plan awards	5,571		8,574		7,401
Long-term incentive plan awards	698		1,786		7,332

Employer match and hypothetical earnings on deferred compensation	2,962		4,680		2,828
Total plan awards and earnings	9,231		15,040		17,561
Total plan awards paid	(12,899)		(8,105)		(10,211)
Compensation deferred	2,414		1,701		1,809
Distributions from the deferred compensation plans	(1,434)		(2,372)		(313)
Forfeitures (1)	(35)		(244)		—
Funding of rabbi trust for deferred stock compensation plan for outside directors	(22)		(1,640)		(1,407)
Funding of rabbi trust for incentive compensation deferral plan (2)	(400)		(1,703)		(1,281)
Deferred executive compensation, end of the year	$	31,450	$	34,595	$	31,918

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

(2) In 2025, 2024, and 2023, funding includes $0.4 million, $1.7 million and $0.9 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. The ECP allows for the grant of up to 250,000 shares of our Class A common stock, and no individual may receive more than 10,000 shares in any calendar year. We do not issue new shares of common stock to satisfy plan awards. Share awards are settled through the purchase 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.

The following table presents amounts related to shares purchased to satisfy ECP plan liabilities and the total compensation cost charged to operations, for the years ended December 31:


(dollars in thousands, except per share data)	2025		2024 (1)		2023
Shares purchased	5,215		0		1,610
Average price paid per share	$	418.26	$	0.00	$	252.32
Cost of shares purchased	$	2,181	$	0	$	406
Total compensation cost (2)	$	2,830	$	6,895	$	4,022

(1) No shares were required to be purchased in the open market. The plan liability was satisfied in cash totaling $3.2 million.

(2) The fluctuations in all years are due to changes in number of participants and/or 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 32%, 35%, and 35% of the awards paid in 2025, 2024, and 2023 respectively. Unrecognized compensation cost at December 31, 2025 of $0.5 million is expected to be recognized in 2026.

Note 12. Income Taxes

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


(in thousands)
	2025		2024		2023
Federal
Current income tax expense	$	131,645	$	152,926	$	116,874
Deferred income tax expense (benefit)	19,547		4,026		(1,002)
State
Current income tax expense	76		13		3
Deferred income tax expense	—		—		—
Income tax expense	$	151,268	$	156,965	$	115,875

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:


(dollars in thousands)
	2025				2024				2023
	Amount		%		Amount		%		Amount		%
U.S. federal tax at statutory rate	$	149,227	21.0	%	$	159,029	21.0	%	$	118,007	21.0	%
State and local income taxes, net of federal income tax effect (1)	60		0.0		10		0.0		2		0.0


Tax credits	(1,432)		(0.2)		(2,000)		(0.3)		(1,300)		(0.2)

Nontaxable or nondeductible items	2,703		0.4		569		0.1		651		0.1

Other adjustments	710		0.1		(643)		(0.1)		(1,485)		(0.3)
Income tax provision	$	151,268	21.3	%	$	156,965	20.7	%	$	115,875	20.6	%

(1) State taxes in Pennsylvania made up the majority (greater than 50 percent) of the tax effect in this category.

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


(in thousands)
	2025		2024
Deferred tax assets:
Other employee benefits	$	18,213	$	18,409
Allowance for management fee returned on cancelled policies	7,322		4,647
Charitable contributions	5,221		—
Deferred revenue	4,457		4,181


Current expected credit loss allowance	3,647		2,966
Unrealized losses on investments	—		3,827
Other	4,958		4,617
Total deferred tax assets	43,818		38,647
Deferred tax liabilities:
Depreciation	47,017		27,089
Pension and other postretirement benefits	13,919		12,276
Unrealized gains on investments	2,532		—
Prepaid expenses	1,506		2,013







Other	3,632		3,687
Total deferred tax liabilities	68,606		45,065
Net deferred tax liability	$	(24,788)	$	(6,418)

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, 2025 or 2024.

We do not have any unrecognized tax benefit that, if recognized, would affect our effective tax rate as of December 31, 2025 and 2024. Any interest expense related to uncertain tax positions would be recognized in income tax expense.

New tax legislation, commonly referred to as the One Big Beautiful Bill Act ("OBBBA"), was signed into law on July 4, 2025. The OBBBA included changes to the timing of tax deductions related to depreciation and software development expenditures in 2025. The legislation also introduced a 1% taxable income floor for charitable deductions effective January 1, 2026. The effects of the OBBBA are reflected in our income tax provisions and effective tax rate for the year ended December 31, 2025.

Federal income taxes paid were $106.5 million, $163.0 million, and $104.0 million in 2025, 2024, and 2023, respectively. Federal income tax refunds received were $2.6 million and $3.1 million in 2025 and 2024, respectively. State income taxes paid, net of state income tax refunds received, were $0.1 million in 2025.

Tax years ending December 31, 2024, 2023 and 2022 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 2025, 2024 or 2023.

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 2025, 2024 or 2023. We had approximately $17.8 million of repurchase authority remaining under this program at December 31, 2025, based upon trade date.

We made stock repurchases in 2025, 2024, and 2023 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)	2025						2024						2023
	Before Tax		Income Tax		Net		Before Tax		Income Tax		Net		Before Tax		Income Tax		Net
Investment securities:
AOCI (loss), beginning of year	$	(22,442)	$	(4,714)	$	(17,728)	$	(31,402)	$	(6,595)	$	(24,807)	$	(66,571)	$	(13,980)	$	(52,591)
OCI before reclassifications	22,119		4,645		17,474		6,557		1,377		5,180		26,021		5,464		20,557
Realized investment (gains) losses	(53)		(11)		(42)		1,620		340		1,280		6,719		1,411		5,308
Impairment losses	1,884		396		1,488		783		164		619		2,429		510		1,919

OCI	23,950		5,030		18,920		8,960		1,881		7,079		35,169		7,385		27,784
AOCI (loss), end of year	$	1,508	$	316	$	1,192	$	(22,442)	$	(4,714)	$	(17,728)	$	(31,402)	$	(6,595)	$	(24,807)

Pension and other postretirement plans:
AOCI (loss), beginning of year	$	(37,802)	$	(7,939)	$	(29,863)	$	14,439	$	3,032	$	11,407	$	57,186	$	12,009	$	45,177
OCI (loss) before reclassifications	(28,154)		(5,912)		(22,242)		(45,655)		(9,588)		(36,067)		(28,862)		(6,061)		(22,801)
Amortization of prior service costs (1)	1,688		354		1,334		1,611		338		1,273		1,446		304		1,142
Amortization of net actuarial gain (1)	(2,519)		(529)		(1,990)		(6,859)		(1,440)		(5,419)		(15,331)		(3,220)		(12,111)
Settlement gain (1)	(572)		(120)		(452)		(1,338)		(281)		(1,057)		—		—		—
OCI (loss)	(29,557)		(6,207)		(23,350)		(52,241)		(10,971)		(41,270)		(42,747)		(8,977)		(33,770)
AOCI (loss), end of year	$	(67,359)	$	(14,146)	$	(53,213)	$	(37,802)	$	(7,939)	$	(29,863)	$	14,439	$	3,032	$	11,407

Total
AOCI (loss), beginning of year	$	(60,244)	$	(12,653)	$	(47,591)	$	(16,963)	$	(3,563)	$	(13,400)	$	(9,385)	$	(1,971)	$	(7,414)
Investment securities	23,950		5,030		18,920		8,960		1,881		7,079		35,169		7,385		27,784
Pension and other postretirement plans	(29,557)		(6,207)		(23,350)		(52,241)		(10,971)		(41,270)		(42,747)		(8,977)		(33,770)
OCI (loss)	(5,607)		(1,177)		(4,430)		(43,281)		(9,090)		(34,191)		(7,578)		(1,592)		(5,986)
AOCI (loss), end of year	$	(65,851)	$	(13,830)	$	(52,021)	$	(60,244)	$	(12,653)	$	(47,591)	$	(16,963)	$	(3,563)	$	(13,400)

*(1)*These components of AOCI (loss) are included in the computation of net periodic pension cost (income). 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 set at least annually by our Board of Directors but cannot exceed 25%. The management fee rate charged the Exchange was 25% in 2025, 2024, and 2023. The Board of Directors elected to maintain the fee at 25% beginning January 1, 2026.

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 $3.0 million, $2.9 million, and $2.6 million in 2025, 2024, and 2023, 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 $25.2 million, $21.9 million, and $20.0 million in 2025, 2024, and 2023, 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 $6.9 million, $5.9 million, and $5.2 million in 2025, 2024, and 2023, 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 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. The loans, net of current expected credit loss allowances totaling $8.8 million and $8.0 million as of December 31, 2025 and 2024, 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.

Erie Insurance Foundation

In 2025, we made a $100 million charitable contribution to the Erie Insurance Foundation (the "Foundation"). The Foundation is a separate entity from Indemnity. It is a tax-exempt private charitable foundation formed to create long-term sustainability for charitable contributions and grantmaking. Certain of Indemnity's directors and employees serve as directors and officers of the Foundation. The $100 million contribution is reported as non-operating expense in the Consolidated Statements of Operations.

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 $735.6 million, or 21.9% of total assets, at December 31, 2025, and $707.1 million, or 24.5% of total assets, at December 31, 2024. Both periods include a current expected credit loss allowance of $0.7 million.

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, 2025, outstanding loans executed under this agreement totaled $146.6 million, of which our portion of the loans is $55.6 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, 2025, our maximum potential amount of future payments on the guaranteed portion is $17.7 million. All loan payments under the participation program are current as of December 31, 2025.

We also have contingent obligations for guarantees related to certain real estate development projects supporting revitalization efforts in our community. As of December 31, 2025, our maximum potential obligation related to the guarantees is $6.4 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)	2025		2024		2023

Cash flows from operating activities:
Net income	$	559,335	$	600,314	$	446,061
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	69,450		56,530		47,415
Deferred income tax expense (benefit)	19,547		4,026		(1,002)

Lease amortization expense	7,333		7,377		6,177
Losses and impairments on investments	976		895		15,604

Loss on disposal and impairments of fixed assets	5,741		3,874		1,607
Net investment (income) loss	(4,385)		(874)		13,772
Receipt of donated equipment and other	(2,634)		—		—
(Decrease) increase in deferred compensation	(3,119)		2,677		6,143

Increase in receivables from affiliates	(28,529)		(81,722)		(100,401)
Increase in accrued investment income	(3,242)		(1,611)		(1,157)

Increase in pension asset	(29,380)		(34,516)		(101,250)

Decrease (increase) in prepaid expenses and other assets	22,345		(2,996)		7,729
(Decrease) increase in accounts payable and accrued expenses	(7,798)		(7,517)		7,237
Increase in commissions payable	17,011		54,600		53,681
Increase (decrease) in accrued agent incentive compensation	57,102		7,381		(27,089)
Increase in contract liability	6,904		2,811		6,678
Net cash provided by operating activities	$	686,657	$	611,249	$	381,205

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 2026 pension contribution.

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