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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2026

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

For the transition period from___to___

Commission file number 0-24000


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

Pennsylvania

25-0466020

(State or other jurisdiction of

(IRS Employer

incorporation or organization)

Identification No.)

100 Erie Insurance Place,

Erie,

Pennsylvania

16530

(Address of principal executive offices)

(Zip Code)


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


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

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

Class A common stock,

stated value $0.0292 per share

ERIE

NASDAQ Stock Market, LLC

(Title of each class)

(Trading Symbol)

(Name of each exchange on which registered)

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

The number of shares outstanding of the registrant’s Class A Common Stock as of the latest practicable date was 46,189,068 at July 24, 2026.

The number of shares outstanding of the registrant’s Class B Common Stock as of the latest practicable date was 2,542 at July 24, 2026.

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PART I.			FINANCIAL INFORMATION

Item 1.			Financial Statements (Unaudited)

			Consolidated Statements of Operations – Three and six months ended June 30 , 2026 and 2025

			Consolidated Statements of Comprehensive Income – Three and six months ended June 30 , 2026 and 2025

			Consolidated Statements of Financial Position – June 3 0 , 2026 and December 31, 2025

			Consolidated Statements of Shareholders' Equity – Three and six months ended June 30 . 2026 and 2025

			Consolidated Statements of Cash Flows – S ix months ended June 30 , 2026 and 2025

			Notes to Consolidated Financial Statements – June 3 0 , 2026

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

Item 3.			Quantitative and Qualitative Disclosures About Market Risk

Item 4.			Controls and Procedures


PART II.			OTHER INFORMATION

Item 1.			Legal Proceedings

Item 1A.			Risk Factors

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



Item 6.			Exhibits


			SIGNATURES

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(dollars in thousands, except per share data)


	Three months ended June 30,				Six months ended June 30,
	2026		2025		2026		2025
Operating revenue
Management fee revenue - policy issuance and renewal services	$	862,879	$	823,853	$	1,649,278	$	1,578,902
Management fee revenue - administrative services	19,619		18,296		39,094		35,941
Administrative services reimbursement revenue	201,554		212,644		401,650		422,917
Service agreement revenue	5,744		5,304		11,685		11,736
Total operating revenue	1,089,796		1,060,097		2,101,707		2,049,496

Operating expenses
Cost of operations - policy issuance and renewal services	684,119		648,280		1,329,147		1,276,030
Cost of operations - administrative services	201,554		212,644		401,650		422,917

Total operating expenses	885,673		860,924		1,730,797		1,698,947
Operating income	204,123		199,173		370,910		350,549

Investment income
Net investment income	22,587		20,030		46,147		39,978
Net realized and unrealized investment gains (losses)	557		479		(208)		981
Net impairment losses recognized in earnings	(591)		(909)		(1,267)		(1,823)

Total investment income	22,553		19,600		44,672		39,136


Other income	1,401		1,974		2,821		5,808
Income before income taxes	228,077		220,747		418,403		395,493
Income tax expense	47,783		46,062		87,635		82,391
Net income	$	180,294	$	174,685	$	330,768	$	313,102


Net income per share
Class A common stock – basic	$	3.87	$	3.75	$	7.10	$	6.72
Class A common stock – diluted	$	3.45	$	3.34	$	6.32	$	5.99
Class B common stock – basic and diluted	$	581	$	563	$	1,065	$	1,008


Weighted average shares outstanding – Basic
Class A common stock	46,189,033		46,189,063		46,188,942		46,188,984
Class B common stock	2,542		2,542		2,542		2,542

Weighted average shares outstanding – Diluted
Class A common stock	52,298,697		52,304,407		52,299,440		52,304,397
Class B common stock	2,542		2,542		2,542		2,542

Dividends declared per share
Class A common stock	$	1.4625	$	1.365	$	2.925	$	2.73
Class B common stock	$	219.375	$	204.75	$	438.75	$	409.50

See accompanying notes to Consolidated Financial Statements. See Note 12, "Accumulated Other Comprehensive Income (Loss)", for amounts reclassified out of accumulated other comprehensive income (loss) into the Consolidated Statements of Operations.

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ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)


	Three months ended June 30,				Six months ended June 30,
	2026		2025		2026		2025
Net income	$	180,294	$	174,685	$	330,768	$	313,102

Other comprehensive income (loss), net of tax
Change in unrealized holding gains (losses) on available-for-sale securities	1,092		6,261		(11,443)		12,039
Pension and other postretirement plans	308		(183)		617		(744)
Total other comprehensive income (loss), net of tax	1,400		6,078		(10,826)		11,295
Comprehensive income	$	181,694	$	180,763	$	319,942	$	324,397

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ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(dollars in thousands, except per share data)


	June 30,		December 31,
	2026		2025
Assets	(Unaudited)
Current assets:
Cash and cash equivalents (includes restricted cash of $39,608 and $30,189, respectively)	$	282,902	$	345,874
Available-for-sale securities	61,715		33,902
Available-for-sale securities lent	1,973		3,436
Receivables from Erie Insurance Exchange and affiliates, net	753,245		735,589
Prepaid expenses and other current assets, net	92,533		66,061

Accrued investment income	14,194		14,311
Total current assets	1,206,562		1,199,173

Available-for-sale securities, net	1,327,084		1,286,566
Equity securities	150,516		70,624
Available-for-sale and equity securities lent	67,939		61,063

Fixed assets, net	593,365		571,476
Agent loans, net	100,680		93,953

Defined benefit pension plan	62,096		24,137

Other assets, net	48,774		48,489
Total assets	$	3,557,016	$	3,355,481

Liabilities and shareholders' equity
Current liabilities:
Commissions payable	$	457,211	$	425,320
Agent incentive compensation	116,570		132,560
Accounts payable and accrued liabilities	205,760		200,701
Dividends payable	68,109		68,109
Contract liability	48,457		47,561
Deferred executive compensation	9,154		9,400
Securities lending payable	63,157		61,936



Total current liabilities	968,418		945,587

Defined benefit pension plan	34,703		33,410

Contract liability	23,148		23,274
Deferred executive compensation	21,018		22,050
Deferred income taxes, net	19,085		24,788
Other long-term liabilities	23,538		22,998
Total liabilities	1,089,910		1,072,107

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	16,500		16,492
Accumulated other comprehensive loss	(62,847)		(52,021)
Retained earnings	3,657,373		3,462,823

Total contributed capital and retained earnings	3,613,196		3,429,464
Treasury stock, at cost; 22,110,132 shares held	(1,170,957)		(1,171,014)
Deferred compensation	24,867		24,924
Total shareholders’ equity	2,467,106		2,283,374
Total liabilities and shareholders’ equity	$	3,557,016	$	3,355,481

See accompanying notes to Consolidated Financial Statements.

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ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

Three and six months ended June 30, 2026 and 2025

(dollars in thousands, except per share data)


	Class A common stock		Class B common stock		Additional paid-in-capital		Accumulated other comprehensive (loss) income		Retained earnings		Treasury stock		Deferred compensation		Total shareholders' equity
Balance, December 31, 2025	$	1,992	$	178	$	16,492	$	(52,021)	$	3,462,823	$	(1,171,014)	$	24,924	$	2,283,374

Net income									150,474						150,474
Other comprehensive loss							(12,226)								(12,226)
Dividends declared:
Class A $1.4625 per share									(67,551)						(67,551)
Class B $219.375 per share									(558)						(558)
Net purchase of treasury stock (1)					8						0				8
Deferred compensation											(670)		670		0
Rabbi trust distribution (2)											524		(524)		0
Balance, March 31, 2026	$	1,992	$	178	$	16,500	$	(64,247)	$	3,545,188	$	(1,171,160)	$	25,070	$	2,353,521
Net income									180,294						180,294
Other comprehensive income							1,400								1,400
Dividends declared:
Class A $1.4625 per share									(67,551)						(67,551)
Class B $219.375 per share									(558)						(558)
Net purchase of treasury stock (1)					0						0				0
Deferred compensation											(793)		793		0
Rabbi trust distribution (2)											996		(996)		0
Balance, June 30, 2026	$	1,992	$	178	$	16,500	$	(62,847)	$	3,657,373	$	(1,170,957)	$	24,867	$	2,467,106


	Class A common stock		Class B common stock		Additional paid-in-capital		Accumulated other comprehensive (loss) income		Retained earnings		Treasury stock		Deferred compensation		Total shareholders' equity
Balance, December 31, 2024	$	1,992	$	178	$	16,466	$	(47,591)	$	3,162,303	$	(1,169,074)	$	22,984	$	1,987,258

Net income									138,417						138,417
Other comprehensive income							5,217								5,217
Dividends declared:
Class A $1.365 per share									(63,048)						(63,048)
Class B $204.75 per share									(521)						(521)
Net purchase of treasury stock (1)					28						0				28
Deferred compensation											(869)		869		0
Rabbi trust distribution (2)											407		(407)		0
Balance, March 31, 2025	$	1,992	$	178	$	16,494	$	(42,374)	$	3,237,151	$	(1,169,536)	$	23,446	$	2,067,351
Net income									174,685						174,685
Other comprehensive income							6,078								6,078
Dividends declared:
Class A $1.365 per share									(63,048)						(63,048)
Class B $204.75 per share									(521)						(521)
Net purchase of treasury stock (1)					0						0				0
Deferred compensation											(963)		963		0
Rabbi trust distribution (2)											167		(167)		0
Balance, June 30, 2025	$	1,992	$	178	$	16,494	$	(36,296)	$	3,348,267	$	(1,170,332)	$	24,242	$	2,184,545

(1)Net purchases of treasury stock in 2026 and 2025 include the repurchase of our Class A common stock in the open market that were subsequently distributed to satisfy stock-based compensation awards.

(2)Distributions of our Class A shares were made from the rabbi trust to one outside director stock compensation plan participant and four incentive compensation deferral plan participants in 2026, and three incentive compensation deferral plan participants in 2025.

See accompanying notes to Consolidated Financial Statements.

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ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	Six months ended June 30,
	2026		2025
Cash flows from operating activities
Management fee received	$	1,656,098	$	1,474,277
Administrative services reimbursements received	410,927		500,337
Service agreement revenue received	11,698		11,735
Net investment income received	46,038		37,795

Commissions paid to agents	(825,406)		(783,117)
Incentive compensation paid to agents	(137,949)		(85,401)
Salaries and wages paid	(130,034)		(139,121)
Pension contribution and employee benefits paid	(80,554)		(78,227)
General operating expenses paid	(148,455)		(154,610)
Administrative services expenses paid	(395,538)		(414,543)
Income taxes paid	(100,011)		(73,431)

Net cash provided by operating activities	306,814		295,694

Cash flows from investing activities
Purchase of investments:
Available-for-sale securities	(529,834)		(208,686)
Equity securities	(95,633)		(14,517)


Proceeds from investments:
Available-for-sale securities sales	387,027		63,703
Available-for-sale securities maturities/calls	85,548		67,415
Equity securities	10,908		16,769

Other investments	252		—
Purchase of fixed assets	(78,933)		(49,931)

Loans to agents and others	(18,700)		(18,166)
Collections on agent and other loans	4,708		6,841
Net cash used in investing activities	(234,657)		(136,572)

Cash flows from financing activities


Dividends paid to shareholders	(136,218)		(127,138)




Net changes in cash collateral for securities lent	1,089		27,646
Net cash used in financing activities	(135,129)		(99,492)

Net (decrease) increase in cash, cash equivalents and restricted cash	(62,972)		59,630
Cash, cash equivalents and restricted cash, beginning of period	345,874		298,397
Cash, cash equivalents and restricted cash, end of period	$	282,902	$	358,027

Supplemental disclosure of noncash transactions
Liability incurred to purchase fixed assets	$	5,255	$	844
Operating lease assets obtained in exchange for lease liabilities	$	2,999	$	2,523

Receipt of donated equipment	$	—	$	1,967

See accompanying notes to Consolidated Financial Statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Nature of Operations

Erie Indemnity Company ("Indemnity", "we", "us", "our") is a publicly held Pennsylvania business corporation that has since its incorporation in 1925 served as the attorney-in-fact for the subscribers (policyholders) at the Erie Insurance Exchange ("Exchange"). The Exchange, which also commenced business in 1925, is a Pennsylvania-domiciled reciprocal insurer that writes property and casualty insurance.

Our primary function as attorney-in-fact is to perform policy issuance and renewal services on behalf of the subscribers at the Exchange. We also act as attorney-in-fact on behalf of the subscribers at the Exchange with respect to all claims handling and investment management services, as well as the service provider for all claims handling, life insurance, and investment management services for 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. The underwriting services we provide include underwriting and policy processing. The remaining services we provide include customer service and administrative support. We also provide information technology services that support all the functions listed above. See Note 4, "Segment Information", for the significant expense categories related to providing these services. Included in expenses for these services are allocations of costs for departments that support these policy issuance and renewal functions.

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

Our results of operations are tied to the growth and financial condition of the Exchange. 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 13, "Concentrations of Credit Risk".

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Note 2. Significant Accounting Policies

Basis of presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X, and include the accounts of Indemnity and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026. For further information, refer to the consolidated financial statements and footnotes included in our Form 10-K for the year ended December 31, 2025 as filed with the Securities and Exchange Commission ("SEC") on February 23, 2026.

Use of estimates

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

Recently issued accounting standards

In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 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.

Investments

Equity securities – Equity securities primarily include non-redeemable preferred stocks and exchange-traded funds (ETFs) with underlying holdings of fixed maturity securities. These securities are reported at fair value, with changes in 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.

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Note 3. Revenue

The majority of our revenue is derived from the subscriber’s agreement between us and the subscribers (policyholders) at the Exchange. In accordance with the subscriber’s agreement, we retain a management fee calculated as a percentage, not to exceed 25%, of all direct and affiliated assumed written premiums of the Exchange. We allocate a portion of our management fee revenue, currently 25% of the direct and affiliated assumed written premiums of the Exchange, between the two performance obligations we have under the subscriber’s agreement. The first performance obligation is to provide policy issuance and renewal services to the subscribers (policyholders) at the Exchange, and the second is to act as attorney-in-fact on behalf of the subscribers at the Exchange, as well as the service provider for the Exchange's insurance subsidiaries, with respect to all administrative services.

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

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

Consistent with its legal structure as a reciprocal insurer, the Exchange does not have any employees or officers. Therefore, it enters into contractual relationships by and through the subscribers' attorney-in-fact. Indemnity serves as the attorney-in-fact on behalf of the subscribers at the Exchange with respect to its administrative services as enumerated in the subscriber's agreement. The Exchange's insurance subsidiaries also utilize Indemnity for these services in accordance with the service agreements between each of the subsidiaries and Indemnity. Collectively, these services represent a second performance obligation under the subscriber’s agreement and the service agreements. The revenue allocated to this performance obligation is recognized over a four-year period representing the time over which these services are provided. The portion of revenue not yet earned is recorded as a contract liability in the Consolidated Statements of Financial Position. During the three and six months ended June 30, 2026, we recognized revenue of $13.7 million and $30.9 million that was included in the contract liability balance as of December 31, 2025. During the three and six months ended June 30, 2025, we recognized revenue of $12.3 million and $27.7 million that was included in the contract liability balance as of December 31, 2024. The administrative services expenses we incur and the related reimbursements we receive are recorded gross in the Consolidated Statements of Operations.

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

The following table disaggregates revenue by our two performance obligations:


	Three months ended June 30,				Six months ended June 30,
(in thousands)	2026		2025		2026		2025
Management fee revenue - policy issuance and renewal services	$	862,879	$	823,853	$	1,649,278	$	1,578,902

Management fee revenue - administrative services	19,619		18,296		39,094		35,941
Administrative services reimbursement revenue	201,554		212,644		401,650		422,917
Total revenue from administrative services	$	221,173	$	230,940	$	440,744	$	458,858

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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 evaluates performance and decides how to allocate resources for the management operations segment based on net income, as reported in our Consolidated Statements of Operations. Net income is used to monitor budget versus actual results. Total assets as reported in our Consolidated Statements of Financial Position, all of which are located in the United States, are reviewed by the CODM for purposes of decision making. The accounting policies of our management operations segment are the same as those described in Note 2, "Significant Accounting Policies, of Notes to Consolidated Financial Statements" included in our Annual Report on Form 10-K for the year ended December 31, 2025 as filed with the SEC on February 23, 2026.

Beginning in the first quarter of 2026, the significant segment expense categories included in the financial information regularly provided to the CODM were revised to align with the current manner in which the CODM reviews expenses in evaluating performance and allocating resources. Prior-period segment expense disclosures have been recast to conform to the current period presentation. This change did not affect our determination that we have one reportable segment and did not affect the measure of net income.

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


	Three months ended June 30,				Six months ended June 30,
(in thousands)	2026		2025		2026		2025
Management fee revenue	$	882,498	$	842,149	$	1,688,372	$	1,614,843
Administrative services reimbursement revenue	201,554		212,644		401,650		422,917
Service agreement revenue	5,744		5,304		11,685		11,736
Total operating revenue	1,089,796		1,060,097		2,101,707		2,049,496

Commissions	508,097		463,442		972,953		900,302
Personnel costs (1)	88,809		85,789		180,872		175,778
Sales and advertising (1)	8,061		9,729		12,966		16,681
Acquisition and underwriting support costs (1)	23,968		27,838		48,092		53,841
Technology infrastructure costs (1)	25,086		24,311		50,889		50,382
Professional fees (1)	19,191		24,192		38,512		50,468
Administrative and other (1)	10,907		12,979		24,863		28,578
Cost of operations - policy issuance and renewal services	684,119		648,280		1,329,147		1,276,030
Cost of operations - administrative services	201,554		212,644		401,650		422,917
Total operating expenses (2)	885,673		860,924		1,730,797		1,698,947
Operating income	204,123		199,173		370,910		350,549

Total investment income	22,553		19,600		44,672		39,136

Other income	1,401		1,974		2,821		5,808
Income tax expense	47,783		46,062		87,635		82,391
Net income	$	180,294	$	174,685	$	330,768	$	313,102

(1) 2025 amounts have been recast to conform to the current presentation.

(2) Management operations segment depreciation and amortization expense included primarily in "Total operating expenses" as reported on our Consolidated Statements of Operations totaled $20.8 million and $16.1 million for the three months ended June 30, 2026 and 2025, respectively, and $40.8 million and $31.9 million for the six months ended June 30, 2026 and 2025, respectively. The Exchange and its insurance subsidiaries reimbursed us approximately 33% and 29% in the six months ended June 30, 2026 and 2025, respectively, for depreciation and amortization expense on assets supporting administrative services. See our Consolidated Statements of Cash Flows for segment expenditures on fixed asset additions.

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Note 5. 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 11, "Capital Stock".

Class A diluted earnings per share is calculated under the if-converted method, which reflects the conversion of Class B shares to Class A shares. Diluted earnings per share calculations include the dilutive effect of assumed issuance of stock-based awards under compensation plans that have the option to be paid in stock using the treasury stock method.

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:


	Three months ended June 30,
	2026					2025
(dollars in thousands, except per share data)	Allocated net income (numerator)		Weighted shares (denominator)	Per-share amount		Allocated net income (numerator)		Weighted shares (denominator)	Per-share amount
Class A – Basic EPS:
Income available to Class A stockholders	$	178,818	46,189,033	$	3.87	$	173,254	46,189,063	$	3.75
Dilutive effect of stock-based awards	0		8,864	—		0		14,544	—
Assumed conversion of Class B shares	1,476		6,100,800	—		1,431		6,100,800	—
Class A – Diluted EPS:
Income available to Class A stockholders on Class A equivalent shares	$	180,294	52,298,697	$	3.45	$	174,685	52,304,407	$	3.34
Class B – Basic EPS:
Income available to Class B stockholders	$	1,476	2,542	$	581	$	1,431	2,542	$	563
Class B – Diluted EPS:
Income available to Class B stockholders	$	1,476	2,542	$	581	$	1,430	2,542	$	563

	Six months ended June 30,
	2026					2025
(dollars in thousands, except per share data)	Allocated net income (numerator)		Weighted shares (denominator)	Per-share amount		Allocated net income (numerator)		Weighted shares (denominator)	Per-share amount
Class A – Basic EPS:
Income available to Class A stockholders	$	328,060	46,188,942	$	7.10	$	310,538	46,188,984	$	6.72
Dilutive effect of stock-based awards	0		9,698	—		0		14,613	—
Assumed conversion of Class B shares	2,708		6,100,800	—		2,564		6,100,800	—
Class A – Diluted EPS:
Income available to Class A stockholders on Class A equivalent shares	$	330,768	52,299,440	$	6.32	$	313,102	52,304,397	$	5.99
Class B – Basic EPS:
Income available to Class B stockholders	$	2,708	2,542	$	1,065	$	2,564	2,542	$	1,008
Class B – Diluted EPS:
Income available to Class B stockholders	$	2,708	2,542	$	1,065	$	2,563	2,542	$	1,008

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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 June 30, 2026, nearly all of our available-for-sale and equity securities were priced using a third party pricing service.

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


	June 30, 2026
(in thousands)	Total		Level 1		Level 2		Level 3
Available-for-sale securities:




Corporate debt securities	$	784,374	$	1,441	$	782,455	$	478
Collateralized debt obligations	232,721		0		232,721		0
Commercial mortgage-backed securities	147,722		0		134,760		12,962
Residential mortgage-backed securities	208,685		0		207,590		1,095
Other debt securities	45,834		0		45,834		0
U.S. Treasury	13,886		0		13,886		0
Total available-for-sale securities (1)	1,433,222		1,441		1,417,246		14,535
Equity securities:
Exchange-traded funds	82,746		82,746		0		0
Non-redeemable preferred stocks:
Financial services sector	71,526		2,068		63,854		5,604
Utilities sector	3,170		0		3,170		0
Energy sector	3,975		0		3,975		0
Consumer sector	5,578		0		2,412		3,166
Technology sector	7,546		0		0		7,546

Communications sector	1,464		0		1,464		0
Total non-redeemable preferred stocks (2)	93,259		2,068		74,875		16,316
Total equity securities	176,005		84,814		74,875		16,316

Total	$	1,609,227	$	86,255	$	1,492,121	$	30,851

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

(2)This includes $25.5 million of securities lent under a securities lending agreement.


	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:
Non-redeemable preferred stocks:
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 non-redeemable preferred stocks (2)	90,763		2,593		76,105		12,065
Total equity securities	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.

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

Level 3 Assets – 2026 Quarterly Change:



(in thousands)	Beginning balance at March 31, 2026		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 June 30, 2026
Available-for-sale securities:
Corporate debt securities	$	3,758	$	(112)	$	119	$	14	$	(3,513)	$	212	$	0	$	478

Commercial mortgage-backed securities	22,701		(515)		134		0		(1,074)		3,013		(11,297)		12,962
Residential mortgage- backed securities	907		0		(4)		0		(23)		1,095		(880)		1,095

Total available-for-sale securities	27,366		(627)		249		14		(4,610)		4,320		(12,177)		14,535
Equity securities	12,299		740		—		3,300		(44)		21		0		16,316
Total Level 3 securities	$	39,665	$	113	$	249	$	3,314	$	(4,654)	$	4,341	$	(12,177)	$	30,851

Level 3 Assets – 2026 Year-to-Date Change:


(in thousands)	Beginning balance at December 31, 2025		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 June 30, 2026
Available-for-sale securities:
Corporate debt securities	$	3,939	$	(99)	$	(20)	$	816	$	(4,214)	$	1,023	$	(967)	$	478

Commercial mortgage-backed securities	23,021		(899)		(6)		0		(1,276)		10,535		(18,413)		12,962
Residential mortgage-backed securities	794		1		(15)		0		(38)		1,233		(880)		1,095

Total available-for-sale securities	27,754		(997)		(41)		816		(5,528)		12,791		(20,260)		14,535
Equity securities	12,065		818		—		3,450		(44)		27		0		16,316
Total Level 3 securities	$	39,819	$	(179)	$	(41)	$	4,266	$	(5,572)	$	12,818	$	(20,260)	$	30,851

Level 3 Assets – 2025 Quarterly Change:



(in thousands)	Beginning balance at March 31, 2025		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 June 30, 2025
Available-for-sale securities:
Corporate debt securities	$	6,030	$	12	$	21	$	968	$	(217)	$	2,377	$	(3,015)	$	6,176
Collateralized debt obligations	695		(4)		5		0		(696)		0		0		0
Commercial mortgage-backed securities	9,129		(240)		104		1,997		(1,098)		9,719		(3,177)		16,434
Residential mortgage- backed securities	923		0		0		0		(18)		0		(905)		0

Total available-for-sale securities	16,777		(232)		130		2,965		(2,029)		12,096		(7,097)		22,610
Equity securities	8,647		(9)		—		2,500		0		0		(498)		10,640
Total Level 3 securities	$	25,424	$	(241)	$	130	$	5,465	$	(2,029)	$	12,096	$	(7,595)	$	33,250

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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 June 30, 2025
Available-for-sale securities:
Corporate debt securities	$	6,268	$	30	$	(33)	$	3,085	$	(792)	$	3,476	$	(5,858)	$	6,176
Collateralized debt obligations	0		(4)		0		700		(696)		0		0		0
Commercial mortgage-backed securities	24,089		(622)		404		1,997		(2,387)		11,072		(18,119)		16,434
Residential mortgage-backed securities	0		0		0		0		(18)		923		(905)		0

Total available-for-sale securities	30,357		(596)		371		5,782		(3,893)		15,471		(24,882)		22,610
Equity securities	6,974		646		—		3,500		0		18		(498)		10,640
Total Level 3 securities	$	37,331	$	50	$	371	$	9,282	$	(3,893)	$	15,489	$	(25,380)	$	33,250

(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:


	June 30, 2026				December 31, 2025
(in thousands)	Carrying value		Fair value		Carrying value		Fair value
Agent loans, net (1)	$	119,672	$	116,064	$	109,331	$	113,850
Other loans receivable, net (2)	18,993		15,923		15,491		12,509


Held-to-maturity securities, net (3)	4,833		4,848		4,833		4,863

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

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

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

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Note 7. 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:


	June 30, 2026
(in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value




Available-for-sale securities:
Corporate debt securities	$	784,968	$	4,200	$	4,794	$	784,374
Collateralized debt obligations	233,053		155		487		232,721
Commercial mortgage-backed securities	147,887		1,550		1,715		147,722
Residential mortgage-backed securities	220,319		421		12,055		208,685
Other debt securities	46,032		187		385		45,834
U.S. Treasury	13,938		3		55		13,886
Total available-for-sale securities, net (1)	1,446,197		6,516		19,491		1,433,222

Held-to-maturity securities - states & political subdivisions	4,833		15		0		4,848

Total fixed maturity securities, net	$	1,451,030	$	6,531	$	19,491	$	1,438,070

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


	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.

The amortized cost and estimated fair value of our fixed maturity securities at June 30, 2026 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.


	June 30, 2026
	Amortized		Estimated
(in thousands)	cost		fair value
Available-for-sale securities:
Due in one year or less	$	63,311	$	63,363
Due after one year through five years	546,224		545,677
Due after five years through ten years	188,795		187,998
Due after ten years	647,867		636,184
Total available-for-sale securities, net (1) (2)	1,446,197		1,433,222

Held-to-maturity securities - due after ten years	4,833		4,848

Total fixed maturity securities, net	$	1,451,030	$	1,438,070

(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 June 30, 2026.

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

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The below securities have been evaluated for credit impairment using criteria described within Note 2, "Significant Accounting Policies, of Notes to Consolidated Financial Statements" included in our Annual Report on Form 10-K for the year ended December 31, 2025 as filed with the SEC on February 23, 2026. 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:


	June 30, 2026
	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	$	432,603	$	4,186	$	13,788	$	608	$	446,391	$	4,794	273
Collateralized debt obligations	146,226		463		2,566		24		148,792		487		144
Commercial mortgage-backed securities	36,406		261		16,335		1,454		52,741		1,715		100
Residential mortgage-backed securities	99,078		1,393		73,795		10,662		172,873		12,055		185
Other debt securities	25,741		169		3,347		216		29,088		385		57
U.S. Treasury	10,404		55		0		0		10,404		55		3
Total available-for-sale securities	$	750,458	$	6,527	$	109,831	$	12,964	$	860,289	$	19,491	762
Quality breakdown of available-for-sale securities:
Investment grade	$	725,388	$	5,879	$	106,979	$	12,807	$	832,367	$	18,686	734
Non-investment grade	25,070		648		2,852		157		27,922		805		28
Total available-for-sale securities	$	750,458	$	6,527	$	109,831	$	12,964	$	860,289	$	19,491	762


	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

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Credit loss allowances

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


	Three months ended June 30, 2026
(in thousands)	Available-for-sale securities		Held-to-maturity securities		Other loans receivable		Agent loans
Balance, beginning of period	$	1,029	$	2,167	$	15,357	$	1,879
Provision and recoveries	(1)		0		289		0
Sales/collections and write-offs	(562)		0		0		0
Balance, end of period	$	466	$	2,167	$	15,646	$	1,879



	Six months ended June 30, 2026
(in thousands)	Available-for-sale securities		Held-to-maturity securities		Other loans receivable		Agent loans
Balance, beginning of period	$	902	$	2,167	$	15,101	$	1,680
Provision and recoveries	274		0		545		199
Sales/collections and write-offs	(710)		0		0		0
Balance, end of period	$	466	$	2,167	$	15,646	$	1,879



	Three months ended June 30, 2025
(in thousands)	Available-for-sale securities		Held-to-maturity securities		Other loans receivable		Agent loans
Balance, beginning of period	$	826	$	2,167	$	12,592	$	1,476
Provision and recoveries	304		0		446		0
Sales/collections and write-offs	(249)		0		0		0
Balance, end of period	$	881	$	2,167	$	13,038	$	1,476



	Six months ended June 30, 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	669		0		840		164
Sales/collections and write-offs	(301)		0		0		0
Balance, end of period	$	881	$	2,167	$	13,038	$	1,476

Net investment income

Investment income (loss), net of expenses, was generated from the following portfolios:


	Three months ended June 30,				Six months ended June 30,
(in thousands)	2026		2025		2026		2025
Available-for-sale securities	$	16,770	$	14,530	$	34,002	$	27,813
Equity securities	1,706		1,149		3,013		2,313
Limited partnerships (1)	(16)		83		716		1,155
Agent loans	2,030		1,557		3,934		3,001
Cash equivalents and other	3,010		3,509		5,773		6,896
Total investment income	23,500		20,828		47,438		41,178
Less: investment expenses	913		798		1,291		1,200
Net investment income	$	22,587	$	20,030	$	46,147	$	39,978

(1)Limited partnership (losses) income includes 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.

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Net realized and unrealized investment gains (losses)

Realized and unrealized gains (losses) on investments were as follows:


	Three months ended June 30,				Six months ended June 30,
(in thousands)	2026		2025		2026		2025
Available-for-sale securities:
Gross realized gains	$	3,074	$	331	$	4,095	$	680
Gross realized losses	(4,037)		(762)		(4,909)		(1,373)
Net realized losses on available-for-sale securities	(963)		(431)		(814)		(693)
Equity securities	1,520		910		606		1,669
Miscellaneous	0		0		0		5
Net realized and unrealized investment gains (losses)	$	557	$	479	$	(208)	$	981

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:


	Three months ended June 30,				Six months ended June 30,
(in thousands)	2026		2025		2026		2025
Equity securities:
Net gains recognized during the period	$	1,520	$	910	$	606	$	1,669
Less: net gains (losses) recognized on securities sold	32		15		(7)		149
Net unrealized gains recognized on securities held at reporting date	$	1,488	$	895	$	613	$	1,520

Net impairment (losses) recoveries recognized in earnings

Impairments on investments were as follows:


	Three months ended June 30,				Six months ended June 30,
(in thousands)	2026		2025		2026		2025
Available-for-sale securities:
Intent to sell	$	(349)	$	(417)	$	(339)	$	(417)
Credit recovered (impaired)	1		(304)		(274)		(669)
Total available-for-sale securities	(348)		(721)		(613)		(1,086)
Expected credit losses:

Agent loans	0		0		(199)		(164)
Other loans receivable	(243)		(188)		(455)		(573)
Net impairment losses recognized in earnings	$	(591)	$	(909)	$	(1,267)	$	(1,823)

Securities lending transactions

As of June 30, 2026, the estimated fair value of loaned securities was $69.9 million, consisting of $44.4 million of available- for-sale securities and $25.5 million of equity securities. 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. Cash collateral received in connection with these securities lending transactions totaled $63.2 million and $61.9 million as of June 30, 2026 and December 31, 2025 respectively. The cash collateral was reinvested in cash equivalents and is included with "Cash and cash equivalents" in our Consolidated Statements of Financial Position. We also received $9.1 million and $4.5 million of non-cash collateral as of June 30, 2026 and December 31, 2025, respectively, 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.

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Note 8. 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 June 30, 2026, 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 June 30, 2026. Investments with a fair value of $110.5 million were pledged as collateral on the line of credit at June 30, 2026. 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 June 30, 2026. The bank requires compliance with certain covenants, which include leverage ratios and debt restrictions. We are in compliance with all covenants at June 30, 2026.

Note 9. 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. These reimbursements represent pension benefits for employees performing administrative services and an allocated share of plan cost for employees in departments that support the administrative functions. For the six months ended June 30, 2026, 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 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.

Our defined benefit pension plan funding policy is generally to contribute an amount equal to the greater of the target normal cost for the plan year, or the amount necessary to fund the plan to 100%. Accordingly, we made a $47 million contribution in January 2026. We plan to make an additional discretionary contribution of $30 million during the third quarter of 2026, which will further improve the plan's funded status. The funded pension plan is presented separately from the unfunded plan as a non-current asset on the Consolidated Statements of Financial Position.

Pension plan cost includes the following components:


	Three months ended June 30,				Six months ended June 30,
(in thousands)	2026		2025		2026		2025
Service cost for benefits earned	$	9,591	$	8,862	$	19,181	$	17,724
Interest cost on benefit obligation	15,513		14,676		31,027		29,351
Expected return on plan assets	(19,889)		(20,069)		(39,778)		(40,138)
Prior service cost amortization	458		422		916		844
Net actuarial gain amortization	(68)		(655)		(135)		(1,309)
Settlement gain (1)	—		—		—		(477)
Pension plan cost (2)	$	5,605	$	3,236	$	11,211	$	5,995

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

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

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Note 10. Income Taxes

Income tax expense is provided on an interim basis based upon our estimate of the annual effective income tax rate, adjusted each quarter for discrete items. For the three months ended June 30, 2026 and 2025, our effective tax rate was 21.0% and 20.9%, respectively. For the six months ended June 30, 2026 and 2025, our effective tax rate was 20.9% and 20.8%, respectively.

Note 11. Capital Stock

Class A and B common stock

Holders of Class B shares may, at their option, convert their shares into Class A shares at the rate of 2,400 Class A shares per Class B share. There were no shares of Class B common stock converted into Class A common stock during the six months ended June 30, 2026 and the year ended December 31, 2025. There is no provision for conversion of Class A shares into Class B shares, and Class B shares surrendered for conversion cannot be reissued.

Stock repurchases

In 2011, our Board of Directors approved a continuation of the current stock repurchase program of $150 million, with no time limitation. There were no shares repurchased under this program during the six months ended June 30, 2026 and the year ended December 31, 2025. We had approximately $17.8 million of repurchase authority remaining under this program at June 30, 2026.

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Note 12. 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:


	Three months ended						Three months ended
	June 30, 2026						June 30, 2025
(in thousands)	Before Tax		Income Tax		Net		Before Tax		Income Tax		Net
Investment securities:
AOCI (loss), beginning of period	$	(14,358)	$	(3,015)	$	(11,343)	$	(15,128)	$	(3,178)	$	(11,950)
OCI before reclassifications	71		15		56		6,774		1,423		5,351
Realized investment losses	963		202		761		431		91		340
Impairment losses	348		73		275		721		151		570

OCI	1,382		290		1,092		7,926		1,665		6,261
AOCI (loss), end of period	$	(12,976)	$	(2,725)	$	(10,251)	$	(7,202)	$	(1,513)	$	(5,689)

Pension and other postretirement plans:
AOCI (loss), beginning of period	$	(66,968)	$	(14,064)	$	(52,904)	$	(38,511)	$	(8,087)	$	(30,424)

Amortization of prior service costs	458		96		362		422		88		334
Amortization of net actuarial gain	(68)		(14)		(54)		(655)		(138)		(517)

OCI (loss)	390		82		308		(233)		(50)		(183)
AOCI (loss), end of period	$	(66,578)	$	(13,982)	$	(52,596)	$	(38,744)	$	(8,137)	$	(30,607)

Total
AOCI (loss), beginning of period	$	(81,326)	$	(17,079)	$	(64,247)	$	(53,639)	$	(11,265)	$	(42,374)
Investment securities	1,382		290		1,092		7,926		1,665		6,261
Pension and other postretirement plans	390		82		308		(233)		(50)		(183)
OCI	1,772		372		1,400		7,693		1,615		6,078
AOCI (loss), end of period	$	(79,554)	$	(16,707)	$	(62,847)	$	(45,946)	$	(9,650)	$	(36,296)

	Six months ended						Six months ended
	June 30, 2026						June 30, 2025
(in thousands)	Before Tax		Income Tax		Net		Before Tax		Income Tax		Net
Investment securities:
AOCI (loss), beginning of period	$	1,508	$	316	$	1,192	$	(22,442)	$	(4,714)	$	(17,728)
OCI (loss) before reclassifications	(15,911)		(3,341)		(12,570)		13,461		2,827		10,634
Realized investment losses	814		171		643		693		146		547
Impairment losses	613		129		484		1,086		228		858

OCI (loss)	(14,484)		(3,041)		(11,443)		15,240		3,201		12,039
AOCI (loss), end of period	$	(12,976)	$	(2,725)	$	(10,251)	$	(7,202)	$	(1,513)	$	(5,689)

Pension and other postretirement plans:
AOCI (loss), beginning of period	$	(67,359)	$	(14,146)	$	(53,213)	$	(37,802)	$	(7,939)	$	(29,863)

Amortization of prior service costs	916		192		724		844		177		667
Amortization of net actuarial gain	(135)		(28)		(107)		(1,309)		(275)		(1,034)
Settlement gain	—		—		—		(477)		(100)		(377)
OCI (loss)	781		164		617		(942)		(198)		(744)
AOCI (loss), end of period	$	(66,578)	$	(13,982)	$	(52,596)	$	(38,744)	$	(8,137)	$	(30,607)

Total
AOCI (loss), beginning of period	$	(65,851)	$	(13,830)	$	(52,021)	$	(60,244)	$	(12,653)	$	(47,591)
Investment securities	(14,484)		(3,041)		(11,443)		15,240		3,201		12,039
Pension and other postretirement plans	781		164		617		(942)		(198)		(744)
OCI (loss)	(13,703)		(2,877)		(10,826)		14,298		3,003		11,295
AOCI (loss), end of period	$	(79,554)	$	(16,707)	$	(62,847)	$	(45,946)	$	(9,650)	$	(36,296)

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Note 13. 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 $753.2 million and $735.6 million at June 30, 2026 and December 31, 2025, respectively, which includes a current expected credit loss allowance of $0.7 million in both periods.

Note 14. Commitments and Contingencies

We have an agreement with a bank for an agent loan participation program. The maximum amount of loans and guarantees that could be funded by us through this program is $150 million. We have committed to fund a minimum of 30% of each loan executed under the program. As of June 30, 2026, our portion of the outstanding loans executed under this agreement is $68.7 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 June 30, 2026, our maximum potential amount of future payments on the guaranteed portion is $24.3 million. All loan payments under the participation program are current as of June 30, 2026.

We also have contingent obligations for guarantees related to certain real estate development projects supporting revitalization efforts in our community. As of June 30, 2026, our maximum potential obligation related to guarantees is $6.2 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 15. Subsequent Events

No items were identified in this period subsequent to the financial statement date that required adjustment or additional disclosure.

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

The following discussion of financial condition and results of operations highlights significant factors influencing Erie Indemnity Company ("Indemnity", "we", "us", "our"). This discussion should be read in conjunction with the historical consolidated financial statements and the related notes thereto included in Part I, Item 1. "Financial Statements" of this Quarterly Report on Form 10-Q, and with Part II, Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" for the year ended December 31, 2025, as contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 23, 2026.

INDEX


			Page Number
Cautionary Statement Regarding Forward-Looking Information			25

Recent Accounting Standards			26
Operating Overview			26
Results of Operations			29




Financial Condition			35



Liquidity and Capital Resources			36

Critical Accounting Estimates			38

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

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

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

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

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

◦general business and economic conditions;

◦factors impacting the timing of premium rates charged for policies;

◦factors affecting insurance industry competition, including technological innovations;

◦dependence upon the independent agency system; and

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

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

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

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

◦changes in government regulation of the insurance industry;

◦litigation and regulatory actions;

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

◦emerging claims and coverage issues in the industry; and

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

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

•ability to attract, develop, retain, and protect talented management and employees;

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

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

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•ability to maintain uninterrupted business operations;

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

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

•ability to meet liquidity needs and access capital.

A forward-looking statement speaks only as of the date on which it is made and reflects our analysis only as of that date. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changes in assumptions, or otherwise.

RECENT ACCOUNTING STANDARDS

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

OPERATING OVERVIEW

Overview

We serve as the attorney-in-fact for the subscribers (policyholders) at the Exchange, a reciprocal insurer that writes property and casualty insurance. Our primary function as attorney-in-fact is to perform policy issuance and renewal services on behalf of the subscribers at the Exchange. We also act as attorney-in-fact on behalf of the subscribers at the Exchange, as well as the service provider for the Exchange's insurance subsidiaries, with respect to all administrative services.

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

Our earnings are primarily driven by the management fee revenue generated for the services we provide on behalf of the subscribers at the Exchange. The policy issuance and renewal services we provide are related to the sales, 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 generally comprises approximately two-thirds of our policy issuance and renewal expenses. The underwriting services we provide include underwriting and policy processing. The remaining services we provide include customer service and administrative support. We also provide information technology services that support all the functions listed above. See Part I, Item 1. "Financial Statements - Note 4, Segment Information, of Notes to Consolidated Financial Statements" contained within this report for the significant expense categories related to providing these services. Included in expenses for these services are allocations of costs for departments that support these policy issuance and renewal functions.

Consistent with its legal structure as a reciprocal insurer, the Exchange does not have any employees or officers. Therefore, it enters into contractual relationships by and through the subscribers' attorney-in-fact. Indemnity serves as the attorney-in-fact on behalf of the subscribers at the Exchange with respect to its administrative services as enumerated in the subscriber's agreement. The Exchange's insurance subsidiaries also utilize Indemnity for these services in accordance with the service agreements between each of the subsidiaries and Indemnity. Claims handling services include costs incurred in the claims process, including the adjustment, investigation, defense, recording, and payment functions. Life insurance management services include costs incurred in the management and processing of life insurance business. Investment management services are related to investment trading activity, accounting, and all other functions attributable to the investment of funds. 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.

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Our results of operations are tied to the growth and financial condition of the Exchange as the Exchange is our sole customer, and our earnings are largely generated from management fees based on the direct and affiliated assumed premiums written by the Exchange. The Exchange generates revenue by insuring preferred and standard risks, with personal lines comprising 71% of the 2025 direct and affiliated assumed written premiums and commercial lines comprising the remaining 29%. The principal personal lines products are private passenger automobile and homeowners. The principal commercial lines products are commercial multi-peril, commercial automobile, and workers compensation.

Information security incident

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

Financial Overview


	Three months ended June 30,						Six months ended June 30,
(dollars in thousands, except per share data)	2026		2025		% Change		2026		2025		% Change
	(Unaudited)						(Unaudited)


Operating income	$	204,123	$	199,173	2.5	%	$	370,910	$	350,549	5.8	%
Total investment income	22,553		19,600		15.1		44,672		39,136		14.1

Other income	1,401		1,974		(29.0)		2,821		5,808		(51.4)
Income before income taxes	228,077		220,747		3.3		418,403		395,493		5.8
Income tax expense	47,783		46,062		3.7		87,635		82,391		6.4
Net income	$	180,294	$	174,685	3.2	%	$	330,768	$	313,102	5.6	%
Net income per share – diluted	$	3.45	$	3.34	3.2	%	$	6.32	$	5.99	5.7	%

Operating income increased in both the second quarter and six months ended June 30, 2026, compared to the same periods in 2025. Management fee revenue for policy issuance and renewal services increased 4.7% to $862.9 million in the second quarter of 2026 and 4.5% to $1.6 billion for the six months ended June 30, 2026, compared to the same periods in 2025. Management fee revenue is based upon the management fee rate we charge and the direct and affiliated assumed premiums written by the Exchange. The management fee rate was 25% for both 2026 and 2025. The direct and affiliated assumed premiums written by the Exchange increased 3.3% to $3.5 billion in the second quarter of 2026 and 3.4% to $6.8 billion for the six months ended June 30, 2026, compared to the same periods in 2025.

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

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

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

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General Conditions and Trends Affecting Our Business

Economic conditions

Unfavorable changes in economic conditions, including declining consumer confidence, inflation, high unemployment, and the threat of recession, among others, may lead the Exchange’s customers to modify coverage, not renew policies, or even cancel policies, which could adversely affect the premium revenue of the Exchange, and consequently our management fee revenue. Elevated inflation, supply chain disruptions, or changes in tariff policies could impact the Exchange's operations and our management fees. In particular, unanticipated increased inflation costs including medical cost inflation, building material cost inflation, auto repair and replacement cost inflation, and social inflation may impact adequacy of estimated loss reserves and future premium rates of the Exchange. If any of these items impacted the financial condition or operations of the Exchange, it could have an impact on our financial results. For a discussion of the potential impacts to our operations or those of the Exchange, see Financial Condition and Liquidity and Capital Resources contained within this report, as well as Part I. Item 1A. "Risk Factors" included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 as filed with the Securities and Exchange Commission on February 23, 2026.

Financial market volatility

Our portfolio of available-for-sale and equity security investments is subject to market volatility, especially in periods of instability in the worldwide financial markets. Net investment income is impacted by the general level of interest rates, which impact reinvested cash flow from the portfolio and business operations. Depending upon market conditions, considerable fluctuation could occur in the fair value of our investment portfolio and reported total investment income, which could have an adverse impact on our consolidated financial condition, results of operations and cash flows. Various ongoing geopolitical events, the uncertain tariff, inflationary, and interest rate environment, and a potential economic slowdown could have a significant impact on the global financial markets with the potential for future losses and/or impairments on our investment portfolio.

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RESULTS OF OPERATIONS

Management fee revenue

We have two performance obligations in the subscriber’s agreement, providing policy issuance and renewal services and acting as attorney-in-fact for the subscribers at the Exchange, as well as the service provider for the Exchange's insurance subsidiaries with respect to all administrative services. We retain management fees for acting as the attorney-in-fact for the subscribers at the Exchange in these two capacities and allocate our revenues between our performance obligations.

The management fee is calculated by multiplying all direct and affiliated assumed premiums written by the Exchange by the management fee rate, which is set by our Board of Directors at least annually. The management fee rate was set at 25% for both 2026 and 2025. Changes in the management fee rate can affect our revenue and net income significantly. The transaction price, including management fee revenue and administrative services reimbursement revenue, includes variable consideration and is allocated based on the estimated standalone selling prices developed using industry information and other available information for similar services. We update the transaction price and the related allocation at least annually based upon the most recent information available or more frequently if there have been significant changes in any components considered in the transaction price. Our current transaction price allocation review resulted in a minor change in the allocation between the two performance obligations in 2026 compared to 2025, which did not have a material impact on our consolidated financial statements.

The following table presents the allocation and disaggregation of revenue for our two performance obligations:


	Three months ended June 30,								Six months ended June 30,
(dollars in thousands)	2026			2025			% Change		2026			2025			% Change
	(Unaudited)								(Unaudited)
Policy issuance and renewal services
Direct and affiliated assumed premiums written by the Exchange	$	3,536,140		$	3,424,202		3.3	%	$	6,768,566		$	6,544,876		3.4	%
Management fee rate	24.41		%	24.37		%			24.41		%	24.37		%
Management fee revenue	863,172			834,478			3.4		1,652,207			1,594,986			3.6
Change in estimate for management fee returned on cancelled policies (1)	(293)			(10,625)			97.2		(2,929)			(16,084)			81.8
Management fee revenue - policy issuance and renewal services	$	862,879		$	823,853		4.7	%	$	1,649,278		$	1,578,902		4.5	%

Administrative services
Direct and affiliated assumed premiums written by the Exchange	$	3,536,140		$	3,424,202		3.3	%	$	6,768,566		$	6,544,876		3.4	%
Management fee rate	0.59		%	0.63		%			0.59		%	0.63		%
Management fee revenue	20,864			21,573			(3.3)		39,935			41,233			(3.1)
Change in contract liability (2)	(1,123)			(3,216)			65.1		(588)			(5,184)			88.7
Change in estimate for management fee returned on cancelled policies (1)	(122)			(61)			NM		(253)			(108)			NM

Management fee revenue - administrative services	19,619			18,296			7.2		39,094			35,941			8.8
Administrative services reimbursement revenue	201,554			212,644			(5.2)		401,650			422,917			(5.0)
Total revenue from administrative services	$	221,173		$	230,940		(4.2)	%	$	440,744		$	458,858		(3.9)	%

NM = not meaningful

(1)A constraining estimate of variable consideration exists related to the potential for management fees to be returned if a policy were to be cancelled mid-term. See Part I, Item 1. "Financial Statements - Note 3, Revenue, of Notes to Consolidated Financial Statements" contained within this report.

(2)Management fee revenue - administrative services is recognized over time as the services are provided. See Part I, Item 1. "Financial Statements - Note 3, Revenue, of Notes to Consolidated Financial Statements" contained within this report.

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Direct and affiliated assumed premiums written by the Exchange

Direct and affiliated assumed premiums include premiums written directly by the Exchange and premiums assumed from its wholly owned property and casualty subsidiaries. Direct and affiliated assumed premiums written by the Exchange increased 3.3% to $3.5 billion in the second quarter of 2026 compared to the second quarter of 2025, primarily driven by increased commercial lines and homeowners premiums written, partially offset by decreased personal auto premiums written. The year-over-year average premium per policy for all lines of business increased 6.8% at June 30, 2026 compared to 11.9% at June 30, 2025. Year-over-year policies in force for all lines of business decreased 2.0% in the second quarter of 2026 compared to an increase 1.7% in the second quarter of 2025.

Premiums generated from new business increased 9.8% to $395 million in the second quarter of 2026 compared to the same period in 2025, primarily driven by increased premiums written in the personal auto and homeowners lines. Contributing to this change was a 13.9% increase in new business policies written and a 3.9% increase in year-over-year average premium per policy on new business at June 30, 2026. The increase in new business was impacted by the 2025 information security incident, which disrupted operations including new business production from June 7, 2025 through June 30, 2025, affecting the year-over-year comparison.

Premiums generated from renewal business increased 2.5% to $3.1 billion in the second quarter of 2026 compared to the second quarter of 2025 resulting from an increase of 7.2% in year-over-year average premium per policy at June 30, 2026, partially offset by a decrease in year-over-year policies in force of 0.9% in the second quarter of 2026.

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

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

Future trends-premium revenue – The Exchange plans to continue its efforts to grow premiums and improve its competitive position in the marketplace. Expanding the size of its agency force through a careful agency selection and monitoring process and increased market penetration in our existing operating territories is expected to contribute to future growth .

Premium levels impacted by changes in policies in force and rate actions affect the profitability of the Exchange and have a direct bearing on our management fee revenue. Future rate actions could be impacted by potential changes in regulation, inflationary trends, geopolitical factors, and tariff policies, among others. As the Exchange writes policies almost exclusively with annual terms, premium rate actions take 12 months to be fully recognized in written premiums, or longer for policies with a rate locking feature. See also Part I. Item 1A. "Risk Factors" included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 as filed with the Securities and Exchange Commission on February 23, 2026.

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Policy issuance and renewal services


	Three months ended June 30,						Six months ended June 30,
(dollars in thousands)	2026		2025		% Change		2026		2025		% Change
	(Unaudited)						(Unaudited)
Management fee revenue - policy issuance and renewal services	$	862,879	$	823,853	4.7	%	$	1,649,278	$	1,578,902	4.5	%
Service agreement revenue	5,744		5,304		8.3		11,685		11,736		(0.4)
	868,623		829,157		4.8		1,660,963		1,590,638		4.4
Cost of operations - policy issuance and renewal services	684,119		648,280		5.5		1,329,147		1,276,030		4.2
Operating income - policy issuance and renewal services	$	184,504	$	180,877	2.0	%	$	331,816	$	314,608	5.5	%

Policy issuance and renewal services

The management fee revenue allocated for providing policy issuance and renewal services was 24.41% of the direct and affiliated assumed premiums written by the Exchange for the three and six month periods ended June 30, 2026 and 24.37% for the same periods in 2025. This portion of the management fee is recognized as revenue when the policy is issued or renewed because it is at that time that the services we provide are substantially complete and the executed insurance policy is transferred to the customer. The increase in management fee revenue for policy issuance and renewal services was driven by the increase in the direct and affiliated assumed premiums written by the Exchange discussed previously.

Service agreement revenue

Service agreement revenue primarily consists of service charges we collect from subscribers (policyholders) for providing multiple payment plans on policies written by the Exchange and its property and casualty subsidiaries and also includes late payment and policy reinstatement fees. The service charges are fixed dollar amounts per billed installment. Service agreement revenue also includes fees received from the Exchange for the use of shared office space.

Cost of policy issuance and renewal services


	Three months ended June 30,						Six months ended June 30,
(dollars in thousands)	2026		2025		% Change		2026		2025		% Change
	(Unaudited)						(Unaudited)
Commissions:
Total commissions	$	508,097	$	463,442	9.6	%	$	972,953	$	900,302	8.1	%
Non-commission expense:
Personnel costs (1)	$	88,809	$	85,789	3.5	%	$	180,872	$	175,778	2.9	%
Sales and advertising (1)	8,061		9,729		(17.1)		12,966		16,681		(22.3)
Acquisition and underwriting support costs (1)	23,968		27,838		(13.9)		48,092		53,841		(10.7)
Technology infrastructure costs (1)	25,086		24,311		3.2		50,889		50,382		1.0
Professional fees (1)	19,191		24,192		(20.7)		38,512		50,468		(23.7)
Administrative and other (1)	10,907		12,979		(16.0)		24,863		28,578		(13.0)
Total non-commission expense	176,022		184,838		(4.8)		356,194		375,728		(5.2)
Total cost of operations - policy issuance and renewal services	$	684,119	$	648,280	5.5	%	$	1,329,147	$	1,276,030	4.2	%

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

Commissions – Commissions increased $44.7 million in the second quarter of 2026 and $72.7 million for the six months ended June 30, 2026, compared to the same periods in 2025, primarily driven by an increase in agent incentive compensation. The estimated agent incentive payouts at June 30, 2026 are based on actual underwriting results for the two prior years and current year-to-date actual results and forecasted results for the remainder of 2026. The profitability component of agent incentive compensation increased due to improved actual and forecasted loss ratios for the three-year period ended 2026 compared to the three-year period ended 2025. Commission expense is also impacted by the growth in direct and affiliated assumed written premium.

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

Non-commission expense decreased $19.5 million for the six months ended June 30, 2026 compared to the same period in 2025. Personnel costs increased $5.1 million, primarily due to increased incentive compensation driven by stronger performance metrics, and higher base compensation. The increase is partially offset by bonuses awarded to all employees in 2025 in recognition of our 100th anniversary. Sales and advertising decreased $3.7 million primarily due to a decrease in agent-related and advertising costs. Acquisition and underwriting support costs decreased $5.7 million primarily due to lower underwriting report costs. Professional fees decreased $12.0 million primarily due to reduced use of third-party services related to technology initiatives. Administrative and other costs decreased $3.7 million primarily due to lower charitable contributions related to the transition of charitable giving through the Erie Insurance Foundation and a decrease in credit card processing fees.

Administrative services


	Three months ended June 30,						Six months ended June 30,
(dollars in thousands)	2026		2025		% Change		2026		2025		% Change
	(Unaudited)						(Unaudited)
Management fee revenue - administrative services	$	19,619	$	18,296	7.2	%	$	39,094	$	35,941	8.8	%
Administrative services reimbursement revenue	201,554		212,644		(5.2)		401,650		422,917		(5.0)
Total revenue allocated to administrative services	221,173		230,940		(4.2)		440,744		458,858		(3.9)
Administrative services expenses
Claims handling services	175,239		186,461		(6.0)		350,263		372,460		(6.0)
Investment management services	9,721		9,305		4.5		17,139		17,038		0.6
Life management services	16,594		16,878		(1.7)		34,248		33,419		2.5
Operating income - administrative services	$	19,619	$	18,296	7.2	%	$	39,094	$	35,941	8.8	%

Administrative services

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

Cost of administrative services

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Total investment income

A summary of the results of our investment operations is as follows:


	Three months ended June 30,						Six months ended June 30,
	2026		2025		% Change		2026		2025		% Change
(dollars in thousands)	(Unaudited)						(Unaudited)
Net investment income	$	22,587	$	20,030	12.8	%	$	46,147	$	39,978	15.4	%
Net realized and unrealized investment gains (losses)	557		479		16.3		(208)		981		NM
Net impairment losses recognized in earnings	(591)		(909)		35.0		(1,267)		(1,823)		30.5
Total investment income	$	22,553	$	19,600	15.1	%	$	44,672	$	39,136	14.1	%

NM = not meaningful

Net investment income

Net investment income includes interest and dividends on our fixed maturity and equity security portfolios and the results of our limited partnership investments, net of investment expenses. Net investment income increased $2.6 million in the second quarter of 2026 and $6.2 million for the six months ended June 30, 2026 compared to the same periods in 2025. The increase in both periods was primarily due to an increase in bond income driven by higher average holdings.

Net realized and unrealized investment gains (losses)

A breakdown of our net realized and unrealized investment gains (losses) is as follows:


	Three months ended June 30,				Six months ended June 30,
(in thousands)	2026		2025		2026		2025
Securities sold:	(Unaudited)				(Unaudited)
Available-for-sale securities	$	(963)	$	(431)	$	(814)	$	(693)
Equity securities	32		15		(7)		149
Change in fair value on remaining equity securities	1,488		895		613		1,520
Miscellaneous	0		0		0		5
Net realized and unrealized investment gains (losses)	$	557	$	479	$	(208)	$	981

Net impairment losses recognized in earnings

Net impairment losses recognized in earnings were lower during both the three and six months ended June 30, 2026 compared to the same periods in 2025. The improvement was primarily driven by lower available-for-sale security impairments, reflecting reduced credit-related impairments. This was partially offset by higher current expected credit losses on other loans receivable during the quarter and higher current expected credit losses on agent loans for the six-month period.

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Financial Condition of Erie Insurance Exchange

Serving in the capacity of attorney-in-fact for the subscribers at the Exchange, we are dependent on the growth and financial condition of the Exchange, who is our sole customer. The strength of the Exchange and its wholly owned subsidiaries is rated annually by AM Best through assessing its financial stability and ability to pay claims. The ratings are generally based upon factors relevant to policyholders and are not directed toward return to investors. The Exchange and each of its property and casualty insurance subsidiaries are rated A "Excellent". See Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 as filed with the Securities and Exchange Commission on February 23, 2026 for a discussion of the Exchange's financial strength rating.

The financial statements of the Exchange are prepared in accordance with statutory accounting principles prescribed by the Commonwealth of Pennsylvania. Financial statements prepared under statutory accounting principles focus on the solvency of the insurer and generally provide a more conservative approach than under U.S. generally accepted accounting principles. Statutory direct written premiums of the Exchange and its wholly owned property and casualty insurance subsidiaries grew 3.4% to $6.8 billion in the first six months of 2026 compared to the same period in 2025. These premiums, along with investment income, are the major sources of cash that support the operations of the Exchange. Policyholders’ surplus determined under statutory accounting principles was $10.7 billion and $10.1 billion at June 30, 2026 and December 31, 2025, respectively. The Exchange and its wholly owned property and casualty insurance subsidiaries' year-over-year policy retention ratio was 87.5% at June 30, 2026 and 88.4% at December 31, 2025.

We have prepared our consolidated financial statements considering the financial strength of the Exchange based on its AM Best rating and strong level of surplus. See Part I, Item 1A. "Risk Factors" included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 as filed with the Securities and Exchange Commission on February 23, 2026 for possible outcomes that could impact that determination.

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FINANCIAL CONDITION

Investments

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


(dollars in thousands)	June 30, 2026		% to total		December 31, 2025		% to total
	(Unaudited)
Available-for-sale securities (1)	$	1,433,222	81	%	$	1,364,828	85	%
Equity securities (2)	176,005		10		90,763		6
Agent loans (3)	119,672		7		109,331		7
Other investments (4)	40,601		2		37,342		2
Total investments	$	1,769,500	100	%	$	1,602,264	100	%

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

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

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

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

Available-for-sale securities

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

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

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


(in thousands)	June 30, 2026 (1)
	AAA		AA		A		BBB		Non- investment grade		Fair value
	(Unaudited)
Basic materials	$	0	$	0	$	2,518	$	4,856	$	1,894	$	9,268
Communications	0		2,953		13,496		9,769		12,628		38,846
Consumer	0		9,788		59,484		78,100		15,428		162,800
Diversified	0		0		0		1,032		0		1,032
Energy	0		897		8,553		47,603		12,038		69,091
Financial	0		0		132,984		186,249		7,851		327,084





Industrial	0		1,001		18,392		36,023		3,678		59,094
Structured securities (2)	218,762		307,947		55,526		38,745		1,369		622,349
Technology	1,996		6,977		2,286		15,273		314		26,846
U.S. Treasury	0		13,886		0		0		0		13,886
Utilities	0		0		15,801		64,895		22,230

ERIE INDEMNITY CO 10-Q